Mumbai: Private equity (PE) and venture capital (VC) investments in February registered a sharp 60% month-on-month decline to $1.4 billion across 63 deals, due to the absence of any mega deals, says a report.
No major deals above the value of $300 million happened last month, causing the decline from January, which registered deals worth $3.5 billion, according to a report released by consultancy firm Ernst and Young on Wednesday.
Exits also recorded a significant drop of over 70% in terms of value and over 50% in terms of volume, primarily on account of fewer open-market exits. In terms of volume, however, investments grew by 17% compared to January.
According to Vivek Soni, partner and leader for private equity advisory for EY, deal activity clearly suggests that PE/VC investors have taken a breather in February after a hectic January. “Global volatility spiked in early February, equity indices corrected, and India was no exception,” he said.
Given the recent announcements by the US on trade tariffs, Soni said global volatility could continue well into March. “While PE/VC investing is about the long-term, volatility does impact investor sentiment and consequently the timing of investments and exits,” he indicated.
The consultancy, however, projected a positive view for the India investment scenario. “The data suggests that the underlying trend of a steady increase in value of PE/VC investments, exits and average deal size remains intact,” it said.
January was a good month for investments, witnessing a large investment worth $1.7 billion in mortgage major HDFC by a group of investors including GIC, KKR and others. On a year-on-year basis, investments grew by 256% to $393 million in February, while the the number of deals also more than doubled, the report said.
February witnessed four deals of over $100 million, aggregating $580 million, compared with none last year. The largest investment was $170-million investment by IIFL to purchase 30% stake in NSDL e-Governance Infrastructure (NEGIL) from IDBI Bank. This was followed by ASK Group’s $155-million investment in Shriram Properties to setup a fund for investing into affordable, mid-housing and distressed assets.
In terms of stages of investments, expansion or growth capital got the highest investments in February, with 22 deals worth $720 million. In terms of volume, startup or early stage investing recorded the highest number of deals at 30, worth $295 million.
There were three buyouts worth $86 million in February. Sectorally, financial services led the activity in February, with $447 million invested across 13 deals, followed by technology with $296 million invested across 14 deals, the report noted.
February also witnessed 12 exits worth $234 million, lower in both volume and value, compared to January. The largest exit in February was Apollo Global selling its investment in Logix Group’s projects in Noida back to the promoters for about $74 million, marking its first exit from a real estate project since it started investing in the sector on its own in 2016, according to the report.