Year 2011’s report card starts with a number of ‘Goods’. Foremost deal levels were up in both value and volume, investments pushed forward to $11.18 bn across 423 deals in calendar 2011 – a y-o-y growth of 40% from 2010, which saw $7.96 bn invested across328 deals. Further, the big boys of Private Equity were back after a prolonged vacation from India. Hence the year saw the return of blockbuster deals with 12 deals over $200 mn, pushing up the average deal size to $34.6 mn from $29 mn in 2010. Even fund-raising was up 32% to reach $3.94 bn from $2.99 bn in 2010 with three above $500 mn funds raised in 2011. However, not all was rosy. The growth in investments was not in line with the expectations at the beginning of the year - year 2010 saw 87% growth. Even though fund-raising was up 32%, only those funds with excellent exit track records or managers with significant PE experience were able to raise capital.
Year 2010 saw Private Equity (PE) investments in India turn the corner, recovering to reach $8.13 bn across 328 disclosed transactions from the low of $4.25 bn across 250 deals made in 2009 - a healthy rise of ~90%. In fact, the past five years have seen a wild roller coaster ride for PE investments in India - with the good times being in 2007 when investments crossed a huge $19 bn, only to see an equally sharp and heart-wrenching fall in 2009. PE players in India spent 2010 doing what they were supposed to do - putting money to work and showing meaningful returns to LPs before they could bargain for fresh funds. Four-S Annual Report provides a detailed analysis.
PE Investors continued to be wary of coming out of the green room in Year 2009, instead preferring to keep 'waiting it out'. As a result, PE investments, which experienced phenomenal growth in India up to the pre-crisis period, saw the rot continue in 2009. As per Four-S data, India witnessed 249 PE/VC deals at a disclosed value of $4.2bn, a dip of 63% compared to 344 deals with a total disclosed value of $11.2bn in the year 2008 and 78% from the peak of $19.2bn in 2007 (382 deals).
2008"Surviving the Slide"
Most expected Year 2008 to see the pin catch up with the bubble. As winds from global storms in financial and equity markets hit Indian shores, the unprecedented 150% YoY growth seen in private equity investments during Year 2007 was never considered sustainable. Overall PE/VC investments in India during Year 2008 witnessed a significant decline of 41.8% to reach $11.2bn (344 deals), from $19.2bn (382 deals) in Year 2007. PE players pitted against panicky investors (Limited Partners), precariously placed portfolios, plummeting growth and promoters still reluctant to cut deals at low prices, were the major deterrent for deal making. The focus rightly shifted to 'Surviving the Slide', keeping in mind that the best investments in private equity are often made in worst of times.
2007"Riding a Wave of Euphoria"
Year 2007 saw Private Equity (PE) and Venture Capital (VC) investments 'Riding a Wave of Euphoria' in India. If 2006 was about PE/VC activity 'Bursting into Bloom', by 2007, as the comfort level of investors increased, the sentiment had escalated to ecstatic levels as can be witnessed in the phenomenal growth in PE/VC investments in India which hit an unprecedented $19.2bn (382 deals) in 2007, 2.6 times the $7.4bn (272 deals) figure of 2006
With GDP growth in 2007 maintaining momentum at 8.7%, projections of over 8% growth for the next 5 years, a stock market that showed 47% growth in the year and strong business indicators, it was an investment party where everyone wanted to be seen. In fact, 2007 saw India stride ahead of China in terms of investment - in comparison, the neighboring BRIC country received only $12.8bnbn PE investment