PE firms invested USD 1,010 million across 82 deals in the last quarter (Oct-Dec) of 2012, a decrease of 74% in value and 24% in volume, as compared to the previous quarter, according to PwC MoneyTree India report, a quarterly study of private equity investment activity.
'For the last three years, starting 2010, investments in the fourth quarter have always shown a decrease as compared to the third quarter. In comparison with Q4 '11, there has been a decline of 32% in terms of both value and volume of deals,' PwC said.
With 30 deals worth 167 million USD in Q4 '12, the information technology (IT) and IT enabled services (ITeS) sector continues to be the leader in value as well as volume. The sector has seen the highest level of PE funding and number of deals in this quarter. The investment in this sector constitutes 17% of the total investment value and nearly 37% of the total number of deals in this quarter.
Sanjay Dhawan, Leader, Technology, PwC said, ''In the IT services segment, we have seen investments in mid-tier companies, who primarily have niche service offerings and PE firms are cherry-picking such opportunities. As a corollary, plain vanilla IT services segment may not attract much investments in the near future. On the other hand, due to the growing popularity and acceptability of online services as a sales channel in India, the business model of such companies has become more acceptable and their potential revenue pipeline more convincing. As a result, we are witnessing increased interest by PE companies in this segment, typically entering as early-stage investors.''
The IT services segment recorded the highest investment amid other sub-segments, with an investment of USD 70 million from three deals. The online services segment received the second highest level of investment worth USD 49 million from 10 deals, which is the highest in terms of volume this quarter.
In terms of investment value, the agri-business sector stood second, generating USD 146 million from four deals. This is a growth of 18% in value with the same number of deals as compared to Q3 '12. The education sector recorded eight deals worth USD 55 million, a five-fold increase in the value of investment with five additional deals in this quarter.
The shipping and logistics sector witnessed two deals worth USD 48 million, a more than three-time increase in the value of investments with one additional deal in this quarter when compared to an investment of USD 15 million from a single deal. The textiles and garments sector has reported four deals worth USD 35 million in this quarter. The sector had not seen any investment in the last quarter.
Among the key sectors, in addition to IT and ITeS, the fast-moving consumer goods (FMCG), engineering and construction (E&C), BFSI, manufacturing and healthcare and life sciences sectors have all reported a considerable decline in the value of investments in this quarter as compared to the preceding quarter.
Private investments in public equity (PIPE) deals (worth 208 million USD) have shown a drop of 85% in value and 7% in volume this quarter. However, when compared to the same period last year i.e. Q4 '11, they have shown a significant increase of 27% in value.
Mumbai, too, witnessed a drop of 84% from the previous quarter in terms of value and a 38% decline in terms of number of deals as compared to the previous quarter. Even when compared to Q4 '11, the investments in Mumbai showed a decline of almost 4% in value and 28% in volume.