Value of Indian PE deals drop by 22 percent in Q2

The first half of the year has seen deals worth more than $6.3 billion close, with investments in telecom and energy making up almost 40 percent of the numbers.

The value of private equity deals completed in India in the second quarter of 2008 stood at $2.8 billion (€1.8 billion), significantly lower than the $3.6 billion worth of deals closed in the first three months of the year, according to Venture Intelligence, a research service focussed on the Indian private equity and venture capital industry.

However, compared to the corresponding period last year, the value of deals increased 47 percent from $1.9 billion.

In the second quarter of 2008, 77 transactions were closed as compared to 115 for the January-March period. In total, the first six months of the year have seen deals worth more than $6.3 billion close vis-à-vis $5.4 billion in 2007.

Arun Natarajan, founder and chief executive officer of Venture Intelligence, said in a statement that the number of PIPE, pre-IPO and late-stage investments declined in the last quarter as a result of the steep fall in the Indian stock markets.

“There has been a significant drying up of investments in the BFSI [Banking, Financial Services & Insurance] and engineering & construction sectors compared to last year,” he said.

Natarajan told PEO that the sectors that drew the largest amount of investments in the first six months of 2008 were telecom and energy with investments worth about $1.3 billion and $1.2 billion respectively.

He added that in terms of investment stages, deal flow for the first six months was largest at the late-stage which witnessed transactions valued at approximately $3.6 billion, followed by PIPE investments worth $1 billion and growth capital deals valued at $719 million. The total value of buyout deals stood at only $140 million.

The past three months saw more than $2 billion being raised by private equity firms for India, with most of it headed for infrastructure and infrastructure-enablers. In the April-June quarter, 3i closed a $1.2 billion fund for Indian infrastructure, Axis Private equity raised $150 million for the first close of its infrastructure fund, 2i Capital raised $60 million for its $200 million growth fund,  IDFC closed a $700 million infrastructure fund and Franklin Templeton closed a $140 million fund.

Other firms currently raising India-focussed funds include Gaja Capital Partners, o3 Capital Advisors, UTI Asset Management and Vision Global Investments.