MoneyTree™ India -- Q1 2014

If the stock market rally and the PE investment flows in the first quarter of 2014 are an indication of how the rest of the year will play out, then the Indian markets have every reason to cheer. The total PE investment in the first quarter reached 2.3 billion USD, more than double the figure in Q1 2013. The IT and ITeS sector attracted investments worth 908 million USD. Overall, it was a positive quarter with general buoyancy in the investment outlook. With the formation of a new government around the corner, future flows (for the rest of this year and the next few years) will hinge upon the stability of the new government and its stand on various policies and regulatory matters.

This quarterly study of private equity investment activity is based on data provided by Venture Intelligence and serves as a reliable source of current and recent trends in PE/VC funding. In addition to aggregate information, the report provides data cuts by industry, region, stage of development and exit. 

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Total PE investments Q1 2014

Q1 2014 Investments by industry

Interesting observations from this report:

We have seen yet another quarter of PE investments dominated by the IT and ITeS sector. It has been an interesting quarter, where most of the leading e-commerce companies have received investments for expansion. The infusion of funds in the online services subsector will continue for the next couple of years for the following reasons: (i) Most companies are in the growth stage and are scaling up (ii) Newer product lines such as baby products, food, niche apparel segments and pet products are now available online and (iii) Global companies in the same line of business are investing in Indian companies, triggering speculation of potential acquisition in the medium- to long-term. With growing competition in the online space, inorganic growth is a possible way forward for some of the global e-commerce players who are keen to establish their footprint in India.

Sandeep Ladda, Leader, Technology, PwC India

Conventional power generation is attracting overseas investment once again as continued market growth is absorbing new capacity and with it, large base-load projects are back in favour. However, the interest is still very selective and conditional, with acquirers closely assessing uncovered fuel costs, coverage of sale contracts and any balance project delivery risks. In another deviation from the past, acquirers are adopting a more hands-on approach post-deal, bringing in their management teams to replace original sponsors to drive their strategy more aggressively.

Kameswara Rao, Leader, Energy, Utilities and Mining, PwC India

The Healthcare sector witnessed reduced activity due to the lack of any major deal in the quarter. The largest deal was a 20 million USD investment as compared to the last quarter of 2013 which saw comparatively larger deals of 45 million USD and 26 million USD. The investment appetite for healthcare companies amongst private equity funds remains strong and one can expect to see an increase in activity going forward.

Dr. Rana Mehta, Leader, Healthcare, PwC India