Study: Indian deals fall, exits rise in 2009

In keeping with markets elsewhere, private equity investments in India in 2009 registered a sharp drop from 2008 and 2007 levels, the results of a new study show.

India saw a total of $3.82 billion invested across 232 deals in 2009, as compared to $10.47 billion invested across 443 deals in 2008, a 63 percent decline in deal value and 48 percent fall in deal volume, according to data from Venture Intelligence, an Indian private equity-focused research service.

Private equity investments in the country have fallen significantly for the second year running,  In 2007, a total of $13.7 billion was invested across 480 transactions.

However, unusually, the number of divestments seen in the country almost doubled in 2009 from 2008. Last year private equity firms exited their investments in 66 Indian companies in 2009 as compared to 36 exits in the previous year. Seven private equity-backed IPOs raised $1.3 billion in 2009, of which 3i-backed Adani Power alone raised $604 million through its public offering in July. The year also private equity firms realise $1 billion through 38 sales of stakes via the public markets, 13 strategic sales, four secondary transactions and four buybacks.

“The volatility in the public markets and continued uncertainty around the ability to raise new funds caused investment activity to be muted in 2009,” Arun Natarajan, founder and CEO of Venture Intelligence, said in a statement.

Natarajan added that the country also witnessed a sharp decline in the number of large-ticket deals with only six investments larger than $100 million being completed in 2009 as compared to 22 such transactions in 2008 and 27 in the year before.

However, in what is a promising sign, there was an uptick in activity in the fourth quarter of 2009. In the last three months of the year, private equity firms invested $1.39 billion across 84 transactions, up from the $1.22 billion invested in 72 deals in the same period in 2008, the study noted.

The $255 million investment in communications software firm Aricent by Kohlberg Kravis Roberts and the Canada Pension Plan Investment Board in September was the largest reported investment in 2009. This was followed by the $180 million investment in by IDFC Private Equity and Oman Investment Fund in tower infrastructure company Quippo Telecom in August. Goldman Sachs Capital Partners’ $115 million investment for a 9.4 percent stake in Max India, a healthcare services company, was the third largest deal of the year.

The most active investors in India in 2009 were International Finance Corporation with 11 investments, Sequoia Capital with nine, followed by Standard Chartered Private Equity and Aavishkaar with eight investments each.