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2018 turns bumper year for PE with second highest investments in last decade, strong investor confidence

FE Online
PE/VC investments, PE/VC investments in 2018, Grant Thornton, IT-enabled service, Grant Thornton India

2018 was a resounding year for Indian private equity (PE) as investors poured $26.3 billion in 793 deals — second highest in the past decade in terms of deal value, said Bain & Company in its annual Indian PE report.

The year was stellar from the exit perspective as well with nearly $33 billion returned to investors across 265 exits indicating investor confidence in the market, Bain & Company said in a statement citing the report titled 2019 India Private Equity Report.

While nearly half of the exit value was driven by $16 billion acquisition of Flipkart by Walmart but despite that 2018 was one of the best years for exits in the last decade.

Moreover, investors prioritizing the quality of investments over quantity was also apparent as the top 15 deals made up for around 40 per cent of the overall deal amount even as the number of deals stood at over $50 million, up from last year, said the report launched in partnership with PE and VC body Indian Private Equity & Venture Capital Association.

From the investor fundraising perspective too, 2018 was phenomenal with $714 billion being raised — third-largest amount on record. This brought the total capital raised since 2014 to a staggering $3.7 trillion.

The investment trajectory (for 2019) is expected to be quite strong, Bain & Company Partner Sriwatsan Krishnan told ET Now. $10 billion was invested in Q1 however it might go bit slow in Q2 due to the election and a wait-and-watch from an investment perspective, Krishnan added.

At least 40 per cent of the investments last year was led by consumer internet and banking and in 2019 too strong growth is expected in the two sectors, said Krishnan.

The report said that while due to the Chinese decision to tighten rules on PE funding, fundraising across Asia-Pacific has slowed down, the dry powder for India has stayed healthy at $11.1 billion.

Importantly, Alternate Investment Funds (AIFs) and distressed-asset management gained traction in the Indian market following government regulations and tax breaks. AIFs are estimated to have raised $7 billion in 2018 up from around $5.5 billion in 2017. Also, the number of registered AIFs almost doubled to 518 as of February 2019 from 268 in 2016.