India Records $16.8 Billion Total Deal Value In 2016
Amid significant macroeconomic policy changes last year, India continued to remain robust market for deal making in 2016. The total private equity (PE) deal value in the country stood at $16.8 billion for the year 2016, second highest since 2008. However, the deal value in 2016 was lower than the high point of 2015, which is attributed to slowdown in the consumer technology and real estate deals.
According to Bain and Company's India Private Equity report 2017, banking, ﬁnancial services and insurance (BFSI), IT and manufacturing were high-growth sectors and contributed to half of the total deal value. Deals in the BFSI sector were fuelled by multiple investments in non-banking ﬁnancial companies (NBFC). Some of the large NBFC deals of 2016 included Janalakshmi Financial (Havells, Morgon Stanley, TPG, CDC), Edelweiss(CDPQ) and Shriram Transport Finance(IFC).
The year 2016 also witnessed some large deals which dominated the market. The top 15 deals contributed to 30 per cent of total investment value in 2016, compared with 25 per cent in 2015. Amongst the top 15 names stands- Mphasis, Resurgent Power, Eicher Motors, SBI Life Insurance, Ibibo Group, Snapdeal and others.
Average deal size came down from $22 million in 2015 to $17 million in 2016. However, excluding consumer technology, average deal size actually increased by 28 per cent over 2015. There were fewer mega deals in 2016 in comparison to 2015 which witnessed the funding rounds of more than 500 million for Flipkart, Ola Cabs, Snapdeal and Paytm.
The report also suggest that new funds and asset types such as venture debt, AIFs, distressed asset funds are also fast emerging and seeing higher competition with global companies (funds) participation like Advent, Bain Capital, KKR, Blackstone.
Venture debt funding is relatively a new trend in India and is showing signs of growth with companies like InnoVen Capital ( Zoom, Oyo Rooms, Voonik, Snapdeal), Trifecta Capital(Rivago, Helpchat, Nephrochat) and IntelleGrow (ThinkLabs, AYE, Banka BioLoo), showing increased activity.
The overall fund raising in Asia Pacific declined by about 16 per cent to $43 Billion in 2016 ($51 Billion in 2015), but India continued to be an attractive destination for investments and India focussed funds rising by 8 per cent to reach $ 4 billion. New asset classes and fund types continue to emerge in India. AIFs (Alternate Investment Funds) showed robust growth in 2016 and became 41 per cent of total funds raised vs. 11 per cent in 2014.
However, the experts warn that fund raising environment will get more challenging in 2017.
According to the report, 2016 was a good year for exits, which should signal confidence for investors, as the report suggests. The top 10 exits together constitute 45 per cent of the total PE deal value in 2016, similar to 2015. The big names in the top exits include- KKR- Alliance Tire Group, Temasek- Bharti Telecom, HDFC Property Fund-Lodha Group, Advent- Care Hospitals and others.
The highest exits activity was recorded in the healthcare and manufacturing sector which accounted for 40 per cent of the total exit value.
Making new deals will be the top priority for funds in 2017. Funds expect BFSI and healthcare to see maximum investment activity in 2017.