PE investments: Manufacturing sector attracts more funds from fewer deals

Our Bureau Chennai | Updated on April 06, 2011


Though IT-enabled services received more number of investments

The information technology and IT-enabled services (IT-ITeS) industry may have received the most number of private equity (PE) investments but it was the manufacturing sector that got more money, albeit in fewer deals.

The IT and ITeS sector at 21 deals got PE investment worth $577 million while the manufacturing sector with 13 deals attracted $1.1 billion and BFSI with seven deals got $423 million, according to a study by Venture Intelligence, a Chennai-based research service focused on PE and merger and acquisition (M&A) transactions.

The PE investment increased by 54 per cent to touch $3.2 billion across 83 deals in the first quarter of the calendar year as against $2.13 billion in 81 deals during the corresponding period last year. The investment in the first quarter was twice that of the immediate previous quarter ($1.5 billion across 83 deals.

The median size of investments in the first quarter was $14.5 million ($11.5 million) — these numbers do not include PE investments in real estate.

The largest PE investment was the $1 billion commitment by Bain Capital and Singapore's GIC to Hero Investments, the Hero group holding firm, which is to buyout Honda Motors' 26 per cent stake in listed 2-wheeler maker Hero Honda.

This was followed by Apax Partners' $375 million commitment to iGate to help buyout fellow listed IT Services firm Patni Computers. Other top investments reported during Q1-2011 included three $200 million commitments — for Hyderabad Airport operator GMR Airport Holdings, road projects firm Isolux Corsan India and non-banking finance firm Indostar Capital Finance.

Exit activity

PE obtained exit routes for their investments in 14 Indian companies during the first quarter, including one IPO (that of PTC Financial Services). This compares with 34 exits, including seven IPOs, in the same period in 2010 and 38 exits, including ten IPOs, in the immediate previous quarter.

Among notable exits via M&A during the period was the acquisition of publicly listed Patni Computers by iGate. This fetched PE investor General Atlantic $254 million for its 17.4 per cent stake. Also, UK-based Pearson's decision to enhance its stake in education services firm TutorVista from 59 per cent to 76 per cent provided a healthy exit route for TutorVista's VC investors Sequoia Capital India, Lightspeed Ventures and SVB - who had invested about $30 million in the firm starting in mid 2006, the release from Venture Intelligence says.

Real estate

PE-real estate firms made ten investments amounting to $883 million across nine deals with disclosed values during the first quarter. The pace of investments during the quarter was lower than that of the same period last year, which witnessed 17 investments with $293 million being invested across 15 deals with disclosed values and also lower compared to the immediate previous quarter which witnessed 16 deals with $397 million being invested across 11 deals.

PE-RE firms, led by India dedicated ones such as Kotak Realty, HDFC Venture, Indiareit and Red Fort Capital, announcing a total of 11 exits during the first quarter compared to eight exits announced during the entire of 2010, says the release.

Published on April 06, 2011

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