Big-ticket PE deals on the rise: Grant Thornton India

The first quarter of 2018 recorded 323 transactions, which include mergers and acquisitions (M&A) and private equity (PE) deals, worth $22.5 billion—down 24% compared to same period in 2017. Grant Thornton India—an assurance, tax and advisory firm, which has put out the report—attributes the dip to the $23 billion Vodafone-Idea merger deal clinched in March 2017.

Barring this deal, the quarter witnessed an unprecedented 3.3 times increase in deal values, according to the Grant Thornton report. “PE investments witnessed a significant 76% growth in the investment values on account of increased big-ticket investment(s),” the report says.

Eight deals garnering $100 million plus—and 11 investments which garnered investment over $50 million and below $100 million—together contributed to 70% of PE investment values. March 2018 alone recorded a 46% growth in deal values, with five PE deals that saw investments over $50 million. However, this was a tad lower compared to February 2018, where 10 such deals were done.

Interestingly, real estate is making investing headlines globally too. London-headquartered Preqin, a provider of alternative-assets investments data, reveals that a total of 1,403 private equity real estate deals were announced globally in Q1 2018, worth an aggregate $67 billion. This was a notable rise compared to Q1 2017, when 1,244 deals were announced for $56 billion. “In fact, Q1 2018 represented a five-year high for deal activity in an opening quarter, both in terms of the number of deals and their aggregate value,” says a Preqin release. This, despite a major decline compared to Q4 2017, which saw 1,612 deals announced worth $101 billion.

Start-ups continued to dominate the PE deal space, continuing their 17 quarter trend, with a 56% share of the total investment volumes garnering $679 million. The quarter witnessed Bigbasket raise its largest fund till date in its Series E funding worth $300 million, while food-delivery company Swiggy raised its biggest-ever funding round with $100 million as part of its Series F funding.

“Active deal making by domestic companies and continued interest of PE investors in real estate and natural resources and energy sectors maintained the upbeat in deal activity in Q1 2018,” says  Pankaj Chopda, Director,  Grant Thornton India. Chopda highlights that real estate, power, start-ups and e-commerce companies garnered 75% of the total PE investments.

There were multiple triggers for the investments to soar in the specific sectors. An increasing trend of divesting stake in large completed and occupied real estate projects by domestic companies to improve liquidity, increasing portfolio of assets by infrastructure investment trusts, government's focus on cleantech projects, follow on fund raising by e-commerce companies to enhance technological edge and for expanding market reach and follow on funding in start-ups to strengthen market position were the key factors driving PE activity, Chopda adds.

Chopda foresees sectoral interest of PE/VC fraternity in real estate, start-ups with focus on fintech and foodtech and e-commerce companies. “Consolidation of PE portfolio companies followed by follow on funding to improve market penetration and position are the expected trends in PE/VC transactions,” he says.

“Active deal making by Domestic companies and continued interest of PE investors in Real Estate and Natural Resources and Energy sector maintained the upbeat in deal activity in Q1 2018," says  Pankaj Chopda, director at Grant Thornton India. Chopda highlights that real estate, power, start-ups and e-commerce companies accounted for 75% of the total PE investments.

There were multiple triggers for the investments to soar in the specific sectors. Increasing trend of divesting stake in large completed and occupied real estate projects by domestic companies to improve liquidity, increasing portfolio of assets by infrastructure investment trusts, government's focus on cleantech projects, follow on fund raising by e-commerce companies to enhance technological edge and for expanding market reach and follow on funding in start-ups to strengthen market position were the key factors driving PE activity, Chopda adds.

Going forward, Chopda foresees sectoral interest of PE/VC fraternity in real estate, start-ups with focus on fintech and foodtech and e-commerce companies. "Consolidation of PE portfolio companies followed by follow on funding to improve market penetration and position are the expected trends in PE/VC transactions," Chopda adds.