| It’s raining dollars on the Deal Street. With private equity deals touching $10.8 billion thus far this year, it is small-ticket sized deals that have hogged the limelight. |
| July-August saw a 67 PE deals totalling to $4 billion, however small-ticket deals have been the volume drivers, according to a data by Grant Thornton. |
| Almost 43 deals were below the average deal size of $60 million (for July-August). The biggest deal was Temasek Holdings’ $1,906.74 million investment in telecom player Bharti Airtel for 5 per cent stake. |
| The data also brings out the fact that global private equity firms are making a beeline even for minuscule stake in an established player. |
| There have been deals as small as $1.55 million. For example, Nexus India capital pumped in $2.33 million in CE Info systems, an IT ITES company for an undisclosed stake. |
| Similarly IDFC picked up 6.55 per cent stake in Andhra Cements for $5.81 million. Helix Investments Mauritius invested $12 million in Mahesh Tutorials for a 30 per cent stake, James Wolfensohn’s private investment fund pumped in $11 million in FabIndia, the textile and apparel maker. |
| Market watchers point out that big ticket deals are scarce in number as the competition to find big deals is getting tougher. In developed economies, large global funds usually go for big deals. However, the market for big PE deals is still at a nascent stage in India. |
| They acquire management control at firms in mature or maturing industries, change the capital structure and revamp management with an eye on increasing shareholder value which they realise through listing and trade sales. Not too many family owned businesses are willing to shed their majority stake. |
| Says Shrividya, Partner, Grant Thornton, “Since last one year, there has been enormous competition among PE players to invest in established businesses. This space has become completely crowded on the back of too much capital chasing a few good companies. |
| Sometimes companies dilute a small stake before an IPO to set a valuation benchmark. On many occasions it is also done with a strategic purpose. Valuation of Indian companies are quite attractive because of the growth potential in India.” |
| However, it is actually the few big deals which are value drivers. Private equity firms generally look for companies with good fundamentals, which becomes difficult to find out in a developing economy like India. So, firms believe in investing a small amount of money which can promise decent returns within a time frame. |
| Rahul Khanna, Director, Clearstone advisors, said, “There are real opportunities in India. If a PE fund thinks that it can reap returns with a smaller stake for a short time frame, it can go ahead with the deal. It actually depends on focus of the PE fund and the kind of corpus it has.” |
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Source: Business Standard