The first quarter of 2016 has started the year off well with 3.1 billion USD investments in 160 deals, underlining the continued heightened interest of private equity in India.
The IT & ITeS sector attracted 1.26 billion in 92 deals to dominate among other sectors.
Unlike last year, which saw record high venture capital deals, this year so far has been more muted, resulting in deal volume in the early stage being lower than corresponding previous quarters. However, the first quarter of the year saw record exits, with this quarter becoming the best Q1 for exits since we began tracking in 2004.
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The year 2015 saw a strong growth in PE and VC funding, however, the interest of investors in eCommerce and Online businesses has started to see a gradual decline given that the valuations for various stages of funding are expected to be weaker in 2016 as compared to 2015. Driven by the interest rates in the US and declining demand in China, capital is also becoming scarce. The exuberance in the sector has been subdued, and there is increased focus on profitability, with players focusing on cost cutting and business viability as investors are demanding performance. In the coming year, the companies that can make a shift to a more operationally efficient model and generate value will be the ones that are likely to survive.
Sandeep Ladda, Leader, Technology
While 2015 was an exciting year for PE deals in financial services, with the advent of new players, products and services, 2016 will continue to see extensive investments, driven by the government’s focus on stabilizing the banking system, sale of stressed assets by banks, the passage of the bankruptcy law and easing FDI (foreign direct investment) norms in the insurance sector. However, some caution will be exercised with the Indian rupee depreciating against the dollar and continuing tax concerns.
Bharti Gupta Ramola, Leader, Financial Services, PwC India
As the government continues to address project-level issues like land acquisition and environmental clearances, as well as enabling early exits from concessions, more infrastructure assets will become investable. This trend will also be aided as debt restructuring progresses. Renegotiation guidelines being developed by the government can also help to address viability issues.
For new projects, improved public-private partnership models, like the hybrid annuity model, are better aligned with the risk appetite of long-term investors. Thus, sectors like road, rail and inland waterways could attract investors over the next few years.
Manish B Agarwal, Leader, Infrastructure, PwC India