Chennai: September quarter has seen the best quarterly performance of private equity funds as infrastructure and real estate continued to attract investments. However, exits were 78 per cent lower compared to the same quarter last year.
The September quarter recorded investments worth $16.4 billion across 289 deals, highest ever funding for a quarter. This was 69 per cent higher than $9.7 billion recorded in the same quarter last year and 37 per cent compared to $12 billion in June quarter, as per the data from EY.
The outperformance of PE/VC investments is mainly attributable to the record high funding of $7.8 billion in infrastructure and real estate, which is 4.4 times the value recorded in September quarter last year. The two sectors accounted for 48 per cent of the total investments.
While investments in real estate at $2.5 billion increased by 194 per cent over $863 million, investments in the infrastructure stood at $5.3 billion, which is 5.9 times the investment in the same quarter last year.
The PE/VC deals of $40.3 billion in the first three quarters of 2019 were 7.4 per cent higher than the entire investment of 2018.
“The deal flow in 2019 has been good with each successive quarter being better than the preceding one. As a result, PE/VC investments in 2019 stood at $40.3 billion at the end of the third quarter, 7.4 per cent higher than investments recorded in entire 2018. The strong growth was primarily driven by investments in the infrastructure sector that accounted for 32 per cent of all PE/VC investments in 2019,” said Vivek Soni, Partner and National Leader Private Equity Services, EY.
However, unlike investments, exits did not see the same momentum as in 2018. In 2019, year-to-date PE/VC exits totalled $8.1 billion down from $8.5 billion in the same period last year.
Exits declined by 78 per cent to $3.9 billion in September quarter against $18 billion in the year-ago quarter, mainly due to the $16 billion Flipkart-Walmart deal. If this is excluded, exits in Q32019 are almost two times the value recorded in Q32018.
According to Pankaj Chopda, Director, Grant Thornton India, the regulatory and policy framework continues to be favourable for heightened PE deal activity. “There is a strong desire among PE players to invest in India. Infra, start-ups, e-commerce, IT, manufacturing and real estate sectors have demonstrated attractiveness in attaining PE funds. While policy actions and missteps have played an important role in shaping the global economic events and their impact on market sentiment, active policy stimulus will be the need of the hour to support deal activity in the face of adverse macro-economic indicators,” he said.