Round up of Indian PE Jan - March 2019

Investment Banking

From an investment perspective, the first quarter of 2019 witnessed a double value jump to USD 7B from Private equity and Venture capitals as compared to USD 3B last year here in India. In January 2019, the big US deal was from SoftBank who are the majority shareholders in Yahoo. Then Japan invested in India's leading e-commerce giant in the field of kids and baby products, Firstcry. This deal amounted to $397M. However, in Feb 2019, India witnessed a rebound coming from the PIPE investments at a massive $431M. The debt funding for ReNew Power from the US Government was to the tune of nearly $350M, making credit investments reach an all-time high.
All of these deals proved that March 2019 was the flourishing phase of PE, which was 30% higher than the previously recorded high in August 2017, which stood at USD 5.4B. The number of PE/VC deals in March 2019 witnessed a rise of nearly 44% as compared to March 2018.
The remarkable deal of RIL boosting PE investments in 1Q
The leading global infrastructure and finance equity investors, Brookfield Asset Management, has acquired a controlling share in Reliance Jio's telecom tower and fibre assets to become the largest ever deal in the infrastructure sector and M&A. It is evident that the first quarter of 2019 has had massive PE investments amounting to USD 11B which is more than 35% that was recorded in the first quarter of 2018, making it the best ever quarter for PE investments in India.
The largest ever deal in PE investment was among the top five deals that happened in Q1 2019. The banking, financial service and insurance BSFI sector was another favored sector for PE/VC investments. Amongst which, an 11% stake in SBI life insurance from Carlyle and CPBI amounts to nearly USD 817M with Bharti Airtel having an inflow of USD 726M investment from GIC.  All these types of investments were significantly large ones which ultimately led to an exponential high in PE investments in the first quarter of 2019.
Amidst other sectors, the deal between Brookfield and Reliance Industries Limited tops the chart with USD 6B investments in March 2019.
Finance, infrastructure and e-commerce sectors fared well compared to credit investments
On a year-over-year basis, the profits from the first quarter of 2019 had increased by nearly 37% to the $11.4B increase in PE investments as compared to $8.3B in Q1 of 2018. The number of PE investment deals over the same time frame in 2019 was 239, which was again, way more than the meagre 183 deals made in 2018.
The exponential increase of PE investments in Q1 2019 is largely attributed to the bumper agreements that happened during that period. Among 26 large deals in Q1 2019, the infrastructure deal between Brookfield and RIL was the largest. While analyzing the type of investments all the fields have fared relatively well except the credit investments.
The financial sector which saw a decline of 8% in Q1 2018 has received $2.9B in Q1 2019, which is a commendable performance. The impact of the liquidity crisis of the NBFCs made the financial sector see red in Q4 2018. One of the more notable investments in Q1 2019, is the one made by Softbank into e-commerce centric logistic firm Delhivery, and e-commerce retailer FirstCry.
E-commerce being the talk of the town of-late is set to reach a $200B by 2026 according to a report. In such a backdrop, e-commerce gets a whopping $785M PE investments in Q1 2019. In 2018 India witnessed strong PE investments back out from major firms. In Q1 2019, there was a 30% decline in exits as compared to 2018, which served as good news to the industry. From an overall perspective, however, the technology sector faced major exits of 7 deals amounting to losses to the tune of nearly $511M in 2019.
Bottom Line
With the fading volatility in the market, these open market exits have performed better with an increase of nearly 50% in open market values and volumes. With the phase of average PE-VC value being sharply high, the lower number of investments embarks on the selectivity aspect. Seizing the opportunities to overcome the hurdles should be the motto of private equity investors to reach par excellence.
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