PE/VC deals at $4.2 billion in Q4, largely ignore E-commerce

Private equity and venture capital investments largely chose to ignore India's E-commerce in the March, 2017 quarter even as the total tally during the period touched $4.2 billion, primarily driven by Canadian pension funds deals, says a report. According to a report by EY, March 2017 reported deals worth $2.6 billion across 60 deals, recording a strong increase of 52 per cent in value and 31 per cent in volume over March, 2016. For the preceding January-March quarter, PE/VC investments were valued at $4.2 billion across 134 deals.

The E-commerce sector, which has been struggling for some time now, saw merely 11 deals worth $85 million in the January-March period of 2017, while in the corresponding period last year there were 29 such transactions worth $764 million.

"The two trends that characterised the quarter were the deal activity of the Canadian pension funds and the decline in E-commerce investments," EY Partner and Leader for PE, Mayank Rastogi said. E-commerce did not see any equity investment in March 2017 - there was only one $4 million debt raised by Bigbasket. "E-commerce sector is undergoing a lot of churn and most businesses are in the recalibration mode, leading to low deal activity," Rastogi added.

The Canadian Pension funds have been actively pursuing deals in India for the last few quarters which was manifest in the high deal numbers in the January-March quarter.

These include CPPIB's $720 million investment in Global Logic for a 48 per cent stake, $342 million investment in Kotak Mahindra Bank by CDPQ and CPPIB for a 1.5 per cent stake, and $302 million invested in Bharti Infratel for a 3.3 per cent stake (KKR was the other investor acquiring 7 per cent stake in the deal).

"Their investments have a few common themes including their investments in companies who are market leaders in their sectors and have attained scale, companies with a high corporate governance record, most investments in partnership with other large private equity investors, and lastly, the deal sizes are largely greater than $100 to 150 million," Rastogi added.

In March, from a sector perspective, telecom topped the chart, due to the large KKR-CPPIB investment in Bharti- Infratel, followed by financial services which clocked $693 million.

On a quarterly basis also, telecom dominated with $952 million KKR-CPPIB investment in Bharti-Infratel, EY said.

Except for the technology sector, which recorded $907 million across 31 deals in January-March, investments across all other prominent sectors like financial services, real estate, and E-commerce declined, it added.

MFs' exposure to bank stocks at record Rs. 1.26 lakh crore

Mutual fund managers continued to be bullish on bank shares, with their allocation to the sector reaching an all time-high of over Rs 1.26 lakh crore at the end of March, mainly due to cheaper valuations. In comparison, fund managers' investments in bank shares stood at Rs 80,468 crore at the end of March 31, 2016. "MFs have been adding exposure to financial sector, especially banking stocks due to several reasons -- lower valuations due to price corrections, expectation of corporate lending growth returning and better net interest margins, especially after the demonetisation announcement which lowered cost of funds for many banks," said Kaustubh Belapurkar, Director Manager Research at Morningstar Investment Adviser. During the past fiscal, many private sector banks, NBFCs and select PSU banks witnessed fresh purchases. Stocks like ICICI Bank and SBI witnessed significant additions, at the same time Axis Bank saw consistent selling, he said.

Equity markets off to a great start: News Corp VCCEdge

Equity markets got off to a great start with capital market deals worth $2.37 billion in the first quarter this year, registering a rise of over 86 per cent over the previous quarter, says a report.

According to News Corp VCCEdge India Quarterly Deals report for the first quarter of this year, there were 45 ECM (equity capital market) deals in the January-March period of this year worth $2.37 billion, while in the October- December 2016, there were 22 such transactions worth $1.27 billion.

Meanwhile, a slew of IPOs in 2017 make the equity markets a viable investment landscape, the report said, adding four of the five IPOs in the quarter were oversubscribed multiple times, showing buoyant market sentiment.

"D-Mart, BSE and Radio City IPOs raised 23 per cent of deal value at $538 million," the report said. Meanwhile, value of deals for QIPs rose by $1,332 million in the January-March quarter as against last year, and the YES Bank and Hindalco Industries dominated the scene with a cumulative issue size of $1,252 million.

"In grim times for other investment options, the equity capital markets came through as a beacon, offering hope that buoyant sentiments and a multitude of IPOs expected to hit the markets in 2017 will make the ECM deals landscape a lucrative investment opportunity," said Nita Kapoor, Head India - New Ventures, News Corp and CEO, News Corp VCCircle.
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