The last quarter of 2016 witnessed the highest activity of the year, with PE investments totalling 4.9 billion USD across 169 deals, a 47% increase in terms of value and a 17% spurt in volume compared to previous quarter. The Telecom sector seized the top spot in Q4 with one large investment, while the Information technology & IT-enabled services sector dropped to third (Banking, financial services & insurance [BFSI]).
Overall, 2016 witnessed a slight slowdown in private equity (PE) activity, with 17 billion USD worth of investments across 682 deals as compared to 19.8 billion USD across 852 deals in 2015. Despite decreased PE activity in 2016, investments across 2015 and 2016 broke through the 9-11 billion USD levels of the previous three to four years. Likewise, the exit levels across the two years have been significantly higher than those from previous years.
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BFSI continues to be an area of focus, with ongoing investments every quarter. A growing economy and poor credit expansion by non-performing asset-hit banks, together with government reforms and a push on digital payments, should encourage more deals in 2017 in asset restructuring companies, real estate companies and non-banking financial companies, as well as fintechs.
Bharti Gupta Ramola
Leader, Financial Services
IT & ITeS companies, backed by a number of e-Commerce and Internet-based start-ups, have dominated PE investments over the last several quarters, accounting for a large share of deal volumes and deal values in 2016. This quarter, however, saw a decline in the total investment in the IT & ITeS space on account of issues with the valuation of e-Commerce companies and declining margins in IT & ITeS. It is expected that 2017 may experience a boost in investment activity in India. Further, sovereign wealth funds as well as pension funds are increasingly investing in companies directly instead of investing in PE firms, which might boost the growth prospects of the industry.