PE investments double in Q1 of 2014

Chennai: Private equity (PE) firms invested $2.27 billion in the January-March quarter of 2014 compared to $1.18 billion in the same quarter last year, an increase of 93%. The number of deals in the quarter was slightly lower at 89 transactions compared to 103 last year, implying the value per transaction has more than doubled. There were five $100 million or more investments in this quarter against one last year.
On a quarterly basis, the numbers were largely flat as there were 86 deals in the previous quarter worth $2.22 billion, as per data provided by Venture Intelligence, a PE research firm..
Infrastructure dominated other sectors in terms of big-ticket investments with the two largest deals belonging to the sector. Canadian pension funds - Canada Pension Plan Investment Board (CPPIB) and Caisse de depot et placement du Quebec (CDPQ) along with Omani sovereign wealth fund State General Reserve Fund (SGRF) invested 2,000 crore in L&T IDPL, the infrastructure development arm of engineering major Larsen & Toubro. The second largest PE deal involved Canadian pension fund PSP Investments (along with IDFC PE) partnering Abu Dhabi's National Energy Company (Taqa) to buy out two hydel power plants operated by Jaiprakash Power Ventures in the state of Himachal Pradesh. PSP and IDFC will put up a total of 1,960 crore for their 39% and 10% stake respectively, while Taqa will own 51%.
"Brisk activity in infrastructure before elections is really a surprise since it is such a policy driven sector. Pure finance VCs and PEs are in wait and watch mode and this is where large, long term sovereign and pension funds have walked in," said Arun Natarajan, CEO of Venture Intelligence. "Overall, large investments are going through but the middle market is still the same. The situation with initial public offerings has also not changed."
However, Sameer Mehta, director at Atlas Advisory, said that it was a due to expectations of change in government. "A new government led by Modi is seen as more infrastructure-centric compared to Congress' perceived socially-centric stance. These expectations are pulling in investors," said Mehta.
IT accounted for $895 million worth of investments. The big tech deals include the $260 million buyout of the Aditya Birla Group's BPO unit Minacs by CX Partners and Capital Square Partners, the $143 million fifth round raised by e-commerce firm Snapdeal.com which was led by eBay along with existing VC investors and General Atlantic's $100 million investment in healthcare software firm Citius IT. Online classifieds firm Quikr also raised $90 million from eBay and existing PE/VC investors.
"Like last year, when CSS Corp and Hexaware were the major deals, IT has continued to see strong activity. I expect this to continue as it is outward looking with markets abroad. Rupee has also helped them," said Natarajan.
Healthcare witnessed reduced activity. There were only nine deals worth $70 million in the sector with a $20 million as the largest. Mehta of Atlas Advisory said that it was due to cyclical reasons and also because there aren't many prospective firms which can be picked up in the market. "Healthcare is still strong. If there is a good venture, it will get funded," he said.