Global PEs pulled out record $10.3 bn from India in 2016

Global private equity (PE) players made good a sudden jump in valuation of their investments in 2016 and chose to pull out a record USD 10.3 billion from domestic markets.

The value of PE investment was stagnant, or even in some cases declined, over the past one decade.

This time, they mostly shied away from pumping in more dollars after their investment in a slew of start-ups hit an all-time high in 2015. It translated into a 30 per cent decline at USD 16 billion in 2016, down from USD 23 billion in 2015.

The total PE exits rose 1 per cent to USD 10.3 billion, from USD 9.4 billion in 2015. This is the highest-ever pullout from the country, according to brokerage house Bain and Co.

Deal-wise, the figure slipped to 199, from 213, down 7 per cent, and the top 10 formed 48 per cent of the total exit value.

PEs fell back on a variety of models to exit, including strategic sales, secondary deals and initial public offerings.

The first two accounted for as much as 47 per cent in 2016, up from 31 per cent in 2015, according to the brokerage data.

“Total exit value crossed USD 10 billion mark for the first time at USD 10.3 billion in 2016, up from USD 9.4 billion in 2015, boosted by deals in healthcare and manufacturing sectors, which alone saw as much as USD 2.2 billion and USD 2.3 billion, respectively, worth of exits,” Bain and Co said.

In contrast, in 2015, these two sectors saw exits worth only USD 1 billion and USD 900 million, respectively.

The brokerage said listings on the stock exchanges dried up towards the end of the year.

Even so, 2016 was the best year for IPOs after 2010, netting Rs 26,473 crore in fresh capital from the primary market.

Leading American player KKR alone netted USD 1.7 billion by selling holding in companies such as Alliance Tires and Gland Pharma to the Japanese Yokohama and the Chinese Fosun, respectively.

Other major exits included Cipla’s 16.7 per cent stake sale in the US-based clinical-stage bio pharmaceutical company Chase Pharma to drugmaker Allergan for USD 1 billion.

These three deals constituted 18 per cent of the total exit value in the year. .

The year also saw Goldman Sachs offloading its entire stake in the Pune-based engineering and electrical fitting firm Sigma Electric for USD 250 million and Temasek selling off in Bharti Airtel to SingTel for USD 657 million.

Others like Sequoia and Helion also made money by selling stake in microfinancier Equitas Holdings through an IPO.

But this comes amid slowing in-bound PE deals. While 2015 saw a record USD 23 billion of hot capital getting into scores of start-ups and other companies, it was down 30 per cent at USD 16 billion in 2016.

The market sentiment was impacted by sluggishness in consumer Internet, banking, financial services and insurance and realty sectors, said industry observers.

Online marketplaces like Flipkart and Ola saw valuation steeply falling by USD 3.7 billion from the dizzying heights in 2015 as investors chose to focus on profitability.

Also, the large series funding in the upwards of USD 500 million was missing in 2016 for start-ups unicorns like Snapdeal, Paytm, Flipkart and Ola. Last ,year such mode of funding constituted four-fifths of deals last year.

Other major PE deals included Blackstone’s investment in Mphasis for about USD 1.1 billion and Canadian Pension Plan Investment Board investing USD 190 million in Kotak Mahindra Bank, among others.

Also, the number of deals declined 8 per cent to 965 in 2016, from 1,049, even though deal value and volume remained higher than the 2014 levels when it stood at USD 15 billion across 800 deals.

As much as 80 per cent of the investment decline came from consumer technology companies, real estate and BFSI, said the brokerage, adding that the fall in e-commerce firms stood at a whopping 54 per cent. But the downtrend was somewhat offset by a steady increase in IT/ITeS, manufacturing and other sectors like education, hospitality and the like which saw 95 per cent jump in deals.

Here, the top 15 formed 31 per cent of total deal size in 2016.

The top deals were Mphasis sale by Blackstone, Resurgent Power by CDPQ, OSGRF, KIA, and GE Capital Services by Aion, forming 12 per cent of the total deal pie.