Chennai: Private equity (PE) and venture capital (VC) investments during the second quarter ended September, have weakened compared to the same quarter of the previous year, a study has stated.
The report, released by EY India Private Equity Deal Tracker, states that at $6.7 billion, quarterly PE/VC investments declined by 23 per cent on a year-on-year basis in the third quarter of the year, compared to $8.7 billion during the same period last year.
This is also the most under-performing quarter in 2018, both in terms of investments and exits. The decline in investments was despite a 29 per cent increase in the number of deals to 178 over the 138 deals during the same period of last year.
The decline in investments was mainly on account of fewer large deals (with a value of more than $100 million) during the quarter. In the period, 13 large deals were recorded, aggregating $3.9 billion, compared to 18 such deals in the same quarter last year, aggregating $7 billion. The second quarter of this calender year recorded 25 large deals aggregating $6.1 billion, while the first quarter ended 31 March, recorded 13 large deals, aggregating $5.7 billion, it added.
Excluding the Flipkart deal, at $1.3 billion, exits declined by 71 per cent compared to the same quarter last year. However, the PE/VC investments for the whole year till date are on track to surpass last year’s investments by recording $22.2 billion, higher by 17.4 per cent. Given some large deals in the pipeline, India is on the track to surpass the previous year high, it added.
Partner and national leader (private equity services), EY India, Vivek Soni, said, ‘PE/VC deal activity was strong in the first half of 2018. However, Q3 data and discussions with PE/VCs suggest that investors are turning cautious. Macro headwinds like rising crude oil prices, depreciating rupee, talk of trade wars, etc, have increased uncertainty. Liquidity-related issues attributed to the NBFC sector and the pronounced sell down in listed financial services stocks have also weakened the sentiment.’
It is possible that the upcoming 2019 general elections, the slowly evolving NPA situation and the developing situation around select NBFCs may influence investors to consider taking a wait-and-watch approach in the short-term, he added.
However, with record levels of PE/VC amounts (over $40 billion) awaiting deployment in India and the long-term secular growth forecast of around seven per cent, EY India remain positive on the medium- to long-term prospects of the Indian PE/VC industry.