Fall in the capital market mirrored itself in the corporate India's private equity transactions, which registered a 23 per cent decline during the year 2008 at $10.59 billion, thanks to the effects of the recent economic downturn, a latest report says.
There were 312 deals in 2008 with a total announced value of $10.59 billion compared with 405 deals with an announced value of $19.03 billion in the year 2007, according to Grant Thornton's latest annual issue.
Though there has been a decline in PE deals but still India Inc braved the downtrend and managed to attract decent number of such deals.
"Over the year, India Inc has shown its resilience by not only being an important destination for International Private Equity funding and inbound M&As but also by being highly active in acquiring international companies," the latest issue of Deal Tracker said.
The report further said that the average PE deal value fluctuated from $46.99 million in 2007 to $33.93 million during 2008. Besides, high value deals saw less activity in 2008.
There were 28 deals of over $100 million in 2008, while in the year 2007 there were as many as 53 such deals.
Some of the large PE deals in 2008 included Providence Equity Partner's acquisition of 20 per cent stake in Aditya Birla Telecom, a subsidiary of Idea Cellular for $640 million in May 2008 and Symphony Capital's investment in DLF Assets (Property fund of DLF) for $450 million.
The decline in PE transactions was mainly because there was less activity in the second half of the year 2008 on account of global financial crisis.
"While the value of PE deals during the first half of 2008 was $7.1 billion, the second half was $3.5 billion," Grant Thornton said.
The highest proportion of PE/VC investment (in terms of announced value) was made in the Real Estate & Infrastructure and Telecom sectors. These segments accounted for over 45 per cent of Private Equity investment made in India during 2008.
Real estate and infrastructure sector attracted an investment of $3.3 billion and about USD 1.4 billion worth of deals were made in the telecom segment.
There was also a fall in the number of big deals in 2008.
There were 27 deals between $100 million and $500 million in 2008 compared with 47 deals in 2007 in this range.
The other sectors that significantly contributed towards value of PE investment include power & energy and banking & financial services sectors. They accounted for nine per cent and eight per cent of PE deal values, respectively.
Going forward, the year 2009 is likely to offer significant prospects for PE deals. However, the deal activity is likely to remain subdued.
"Private Equity will see reduced valuations and slower pace of activity but surer investments as investors seek to take advantage of the changed valuation dynamics," Grant Thornton partner Harish H V said.
Echoing similar sentiment C G Srividya, partner, specialist advisory Grant Thornton said, "Overall, we expect 2009 to offer significant prospects for PE players to invest in quality growth companies at good valuations and recoup some of the losses they have made recently"
