Bain & Company’s India Private Equity Report 2017 said private equity (PE) market in India continued to be an attractive destination for investors in 2016 as exits went up by 2 per cent to reach $9.6 billion, up from $9.4 billion in 2015
Besides exits, funds also affirmed their faith in the market as allocations to India rose by8 percent to reach $4 billion. Similarly, total PE deal values continued to be robust with2016 recording the second highest year since 2008 at about $16.8 billion.
Instead of getting blown around by global crosswinds, the PE industry performedsurprisingly well. Returns kept growing and limited partners (lPs) remained cashpositive, indicating that the PE investment cycle is solidly self-sustaining, according tothe report.
“last year was a fantastic year for private equity in India as the country continued to be an attractive destination for investments and saw higher fund allocations compared to2015. The overall deal making environment was robust even as consumer technologyslowed down, with deal value and volumes still the second highest in the last nine years.Also importantly, 2016 was good for exits, which should signal confidence to investorsand funds,” said Arpan Sheth, Partner at Bain & Company and one of the authors of thereport.
The healthcare and manufacturing sectors saw the highest exit activity and accounted for 40 percent of the total exit value. On the other hand, IT, telecomand banking, financial services and insurance (BFSI) accounted for 50 percentof un-exited deal value from the investment period between 2008 and 2012. PEfunds that Bain spoke to said they aim to adopt a wait-and-see policy for these deals in2017 and in the meantime, plan to continue working on their portfolios.
Although public market sales continued to be prominent modes of exit, secondary and strategic sales increased by 15 percent in volume. Public market sales including IPOs were subdued last year, and there was a marked increase in the number of strategic andsecondary sales. Besides, average deal sizes were significantly higher for strategic salesand buybacks.
The top 10 exits together constituted 45 percent of total PE deal value in 2016, similar to2015. While top-line growth is the most important factor in returns today, investorsbelieve cost and capital efficiency as well as inorganic M&As will be the key levers forvalue creation in the future.