Private equity bets big on India despite election slump

Private equity firms are spending big in India despite a slowdown in dealmaking before and during the country’s recent election.

Firms deployed $12.5 billion across 306 private equity deals in the first five months of 2019, according to a May PE Dealtracker from professional services business Grant Thornton. Spending almost doubled from the $7.5 billion spent during the same period last year, while deal count declined from 342.

The slump coincided with a month-long general election in April and May, which saw prime minister Narendra Modi retain power.

“In election years you tend to see a slowdown in deal activity,” Kumar Mahtani, managing director and head of the Mumbai office at BDA Partners, told Private Equity International.

“We have a budget announced on Friday and expect a lot of reforms from a government that came in with a thumping majority, so activity will likely pick up again later in the year.”

Major deals this year have included Blackstone’s purchase of a majority stake in packaging business Essel Propack in April for up to $462 million and a $200 million funding round for online grocery start-up Grofers by a consortium including SoftBank’s Vision Fund and Sequoia Capital the following month.

Firms completed at least $5.8 billion of private equity, infrastructure and real assets buyouts last year, compared with $5.4 billion in the previous four years combined, EMPEA’s Industry Statistics Year-End 2018 found.

Blackstone president Jonathan Gray is a “big believer” in India and the firm will be accelerating its activity there, he wrote in The Economic Times in February.

India-focused funds collected $3.2 billion across 16 vehicles last year, up from $2.6 billion in 2017 but less than the previous two years, according to PEI data. ChrysCapital raised $867 million for its eighth India-focused vehicle in January, exceeding its $850 million hard-cap.