PE investment falls for 3rd month, August deal tally at $1 billion

Private equity investments in the country in August -- at $1,090 million -- declined for the third month in a row both in terms of volume and value, down 37 per cent from last year.

According to assurance, tax and advisory firm Grant Thornton, there were 85 PE transactions worth $1,090 million while in August 2015, there were 103 deals worth $1,720 million.

For January-August as well, PE investments displayed a sharp 30 per cent year-on-year decline in investment values, largely owing to cautious investor sentiment.

"In the eight months to the year, PE has clocked over 650 transactions, contributing around $8 billion in value.

Though the volume of transactions seems to be at par, there is a decline in deal value by about 30 per cent on a year-on-year basis," Grant Thornton India LLP Partner Prashant Mehra said.

The report further noted that there has been a decline in big-ticket deals as so far this year there were only 17 investments valued above $100 million while in January- August 2015, there were 38 such transactions.

In line with previous trends, August was dominated by investments in start-ups, which contributed to over 70 per cent of total volumes and 35 per cent of values.

The month saw Hike Ltd raising its Series D funding of $175 million and garnering a billion dollar valuation, adding to India's home-grown unicorns.

Other sectors such as manufacturing and transport and logistics also received large investments over $100 million during the month.

Moreover, the average deal value in the PE space seems to have come down to $12 million in 2016, from $17 million in 2015, Mehra said.

He added that "most PE investments are actually taking place in the start-up sector which perhaps explains the decrease in average deal spend". The other major areas that are attracting PE money are core sectors such as manufacturing, transport and logistics and BFSI.

Mehra believes that with all factors being attractive and favourable for PEs, the deals will perhaps be visualised as an alternative means of financing consolidation for large and select corporates, thus resulting in the long-awaited big-ticket transactions in the PE space.

"The sectoral trend should continue towards core sectors and probably see some activity in the retail or consumer sector as well in the next few months," he said.