Indian private equity activity nosedives

The first quarter of this year saw the amount invested by private equity firms in the sub-continent plummet 87% year on year to just $526m.

Private equity firms invested a total of $526 million in India in the first three months of 2009, a massive fall from the $3.9 billion invested in India in the same period in 2008.

The total number of transactions made by private equity firms also plummeted from 133 in Q1 of 2008 to 36 in the first three months this year, according to data from Venture Intelligence, an Indian private equity-focused research service.

In the last quarter of 2008, private equity firms invested a total of $1.2 billion in India across 63 deals.

In terms of sectors, the IT and IT-enabled services sector saw the most number of deals. Thirteen investments worth $95 million were made in the sector in the first three months of 2009. The manufacturing and banking and financial services sectors followed next with four and three deals respectively. In terms of the total value of deals, however, banking and financial services drew $53 million, more than the $36 million invested in manufacturing.

The first quarter of 2009 also witnessed a sharp slowdown in venture investing. The first three months of this year saw $44 million invested across nine venture capital deals, while the same period last year saw a total of $226 million invested across 33 deals.

Although investment activity has slowed down across the board, there seems to be an interesting short-term trend in terms of the stage of the investments being made, Arun Natarajan, chief executive of Venture Intelligence, said in a statement.

“There are more deal closures at the two ends of the spectrum – late stage and early stage. In the current environment, growth stage companies seem to be postponing their fundraising plans due to both business uncertainty and valuation concerns,” Natarajan said.

In all of 2008, private equity firms invested $10.8 billion across 399 Indian deals.