India-focused funds did better in 2016 than Asia-Pacific-focused funds.
Capital raising for India-focused funds increased in 2016 while fundraising elsewhere in the region stagnated, according to Bain & Company’s India Private Equity Report 2017.
India private equity capital raising grew by 8 percent to $4 billion in 2016 while fundraising across the Asia-Pacific region dropped by almost 43 percent to $16 billion in 2016, from $51 billion in 2015.
Some of the notable India-focused funds raised last year include Multiples Alternate Asset Management’s second buyout fund that closed on $690 million and Brookfield Asset Management and State Bank of India’s $1 billion distressed asset fund.
Government regulations and tax breaks including the new alternative investment funds (AIFs) regime have helped contribute to aggregate fundraising for the year, accounting for 41 percent of total funds raised in 2016, the report said.
The Securities and Exchange Board of India, the country’s market regulator, broadly defines AIFs under three categories: category I for venture and infrastructure funds; category II for private equity and debt funds; and category III for hedge funds.
The report also noted that fundraising will be a higher priority for GPs in 2017 compared with the previous year, where buying companies and working on their existing portfolios was their main focus. Close to 70 percent of GPs said they will launch a new fund in the next 12 to 24 months.
A majority of funds reported greater participation from LPs in the form of passive co-investment rights in their current portfolio. They expect LPs to play a more active role in 2017 and will likely offer more co-investment opportunities.
Total private equity deal value for the year stood at $16.8 billion, the second-highest number recorded since 2008. Banking, financial services and insurance (BFSI), consumer tech and IT deals made up approximately 55 percent of investment value. Making new deals will also be a top priority for funds in 2017; they expect more investment opportunities in BFSI and to healthcare.
Last year, India’s top 15 deals accounted for roughly 30 percent of overall deal value. Among these transactions include Blackstone’s over $800 million acquisition of tech services provider Mphasis; GIC, Advent International and Bain Capital’s $350 million purchase of engineering company QuEST; and AION India’s $330 million acquisition of GE Capital.
However, the average deal size came down from $22 million in 2015 to $17 million in 2016. According to Bain, the overall decline reflected a lack of mega deals in the consumer technology sector.