PE / VC investments grow by 23% in April, e-commerce leads as a sector: EY

Private equity and venture capital (PE/VC) investment recorded a 23 per cent rise at $2.4 billion in April 2018, compared with $1.9 billion recorded during the same month last year, mainly driven by large deals. The large deals were mainly in sectors such as e-commerce and life sciences, according to a study by EY.

There were eight deals of value greater than $100 million in April 2018, aggregating $1.9 billion, compared to six deals worth $1.2 billion in April 2017, EY’s private equity monthly deal tracker, said.
Exits also recorded a significant rise at 47 per cent in terms of value during the reporting period, mainly on account of a single large exit by Actis worth $692 million.
“In alignment with our optimistic outlook, PE/VC deal activity in India continues to gather steam and become more robust. Both investments as well as exits are on an upward trend,” Vivek Soni, partner and leader for Private Equity Advisory, EY said.
“The recently announced majority acquisition of Flipkart by Walmart is expected to re-rate the Indian startup sector. We believe it will inject new found enthusiasm and energy into the early to mid-stage investing eco-system and inspire many more entrepreneurs. We continue to believe that policy and political stability permitting, the next 4-5 years are expected to be the golden age for the Indian PE / VC sector,” he added.
In terms of volume, the growth was a modest 5 per cent (69 deals in April 2018 versus 66 deals in April 2017). While the first three months of 2018 recorded some very large deals in the infrastructure and real estate space, April 2018 was led by pure play equity deals.
Infrastructure and real estate sectors recorded three deals worth $335 million compared with seven deals worth $2 billion in March 2018. Nonetheless, year-on-year comparisons show that the interest in infrastructure and real estate sectors in 2018 seems to be greater than in 2017, which recorded two deals worth $179 million in April 2017.
There were eight deals of value greater than $100 million in April 2018, totalling $1.9 billion, compared with six deals worth $1.2 billion in April 2017. The largest investment in April 2018 saw Softbank invest $400 million for a 21-per cent stake in Paytm Mall, the brand name under which Paytm E-Commerce operates an online market place.
This deal values the online retailer at roughly $1.9 billion. Softbank has been one of the largest investor in the Indian e-commerce sector with sizeable stakes in some of India’s largest unicorns. This was followed by couple of deals in the life sciences sector — $350 million investment in Mankind Pharma Limited by ChrysCapital, GIC and CPPIB for a 10-per cent stake, and Apax Partner’s $350-million acquisition of Healthium Medtech, a maker of surgical equipment.
The former deal marks ChrysCapital’s return to Mankind Pharma, a company it helped build – in 2015, it had sold 11 per cent stake in Mankind to another PE firm Capital International for $214 million, making a ten-fold return in seven years.
The largest deal in the infrastructure and real estate asset class involved CPPIB investing $185 million in Island Star Mall Developers, CPPIB’s strategic investment platform with Phoenix Mills to develop, own and operate retail-led mixed-use developments across India.
CPPIB was the largest PE investor in April 2018, with three deals with a combined value of $430 million followed closely by Blackstone with three deal worth $395 million and Softbank with the one large deal mentioned above.
In terms of stages of investment, expansion and growth investments recorded the highest value of investments in April 2018, with 22 deals worth $1.5 billion. In terms of volume, startup and early stage investing recorded the highest number of deals (35 deals worth $175 million). There were three buyouts worth $625 million in April 2018, taking the total value of buyouts in 2018 to $3.3 billion, surpassing the total value recorded in 2017 by 6 per cent.
From a sector point of view, e-commerce led the activity after a long time with 12 deals worth $476 million, mainly on account of the large investment in Paytm Mall by Softbank. Nonetheless, this is the first time in 22 months that the number of e-commerce deals has been in double digits. Likewise, lifesciences sector (healthcare and pharmaceuticals) recorded its highest ever investment value in a month, at $711 million across five deals, mainly on account of two large deals of Mankind and Healthium mentioned above. In terms of number of deals, financials services was the leader with 18 deals.
April 2018 recorded 15 exits worth $1.2 billion, a 47-per cent rise in value in half as many deals as in April 2017. This was mainly on account of a single deal which accounted for more than 50 per cent of the value of exits in April 2018 – Actis’ sale of Ostro Energy to ReNew Power Ventures, a CPPIB backed company, for $692 million (enterprise value of $1.66 billion).
This deal makes ReNew Power the largest renewable energy company in the country with total commissioned and under-construction assets of about 4,300 MW. Actis had set up Ostro in early 2015 with an investment of $280 million. Another large exit during the month saw TPG and CX Partners exit their stake in Healthium Medtech to Apax for close to $300 million.
There were just five open market exits worth $98 million in April 2018 compared with 15 exits worth $653 million in April 2017. Also, there was no PE-backed Initial Public Offerings in April 2018. Strategic exits recorded the highest value of exits at $737 million across five deals, mainly on account of the large exit by Actis from Ostro.
Fund raising
April 2018 witnessed five fund raisings worth $470 million, while fund raising plans announced stood at $1.5 billion, most of which was accounted for Green Growth Equity Fund (GGEF), a JV between Everstone and Lighthouse focused on making investments in renewable energy.