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PricewaterhouseCoopers India Pvt Ltd
MoneyTreeTM India Report Q4 2016
Technology Institute
This special report provides summary results of Q4 ’15, Q3 ’16, and Q4 ’16.
Data provided by Venture Intelligence
PwC MoneyTree India – Q4 2016 2
Table of contents
1. Overview 3
2. Analysis of PE investments 5
Total equity investments in PE-backed companies 5 Investments by industry 6 Investments by stage of development 8 Investments by region 9 Top 20 PE deals 10
3. Analysis of PE exits 11
Exits by industry 12 Exits by type 13 Top five PE exits 14
4. Active PE firms 15
5. Sector focus – IT & ITeS sector 16
Total PE investments 17 Investments by stage of development 18 Investments by region 19 Investments by subsector 20 PE exits in the sector 21
Definitions 22
PwC MoneyTree India – Q4 2016 3
1. Overview
The year 2016 witnessed a slight slowdown in private equity (PE) activity, with 17 billion USD worth of investments across 682 deals as compared to 19.8 billion USD across 852 deals in 2015.
Technology and e-Commerce together accounted for 30% of the PE investments in terms of value and 57% of the deal volume in 2016, with 5.1 billion USD invested across 388 deals. Financial services attracted investments worth 3.1 billion USD across 65 deals—a majority of them in the non-banking financial company (NBFC)/microfinance institutions (MFI) space. Other sectors which contributed towards the investment activity were Energy (2 billion USD), mainly driven by an increased interest in the renewables space, Telecom (1.7 billion USD) and Manufacturing (1.2 billion USD).
In terms of stage of funding, late stage and buyouts together accounted for 57% of the investment value in 2016, with a combined value of 9.7 billion USD across 121 deals. This was partly attributable to the higher levels of activity from sovereign wealth and pension funds, in particular in the second half of the year. This trend is expected to continue in 2017, with numerous opportunities to support the deleveraging of Indian balance sheets and sector consolidation. Early stage and growth investments amounted to 1 billion USD and 4.2 billion USD, respectively, in 2016.
2016 saw exits worth 7.7 billion USD across 214 deals. In terms of sectors, Manufacturing saw the highest level of exit activity (2.3 billion USD), closely followed by Technology and e-Commerce (1.5 billion USD) and Financial services (1.1 billion USD). Over 44% of the exit value came from strategic sales, which could be a precursor to higher corporate buyer activity in 2017.
The last quarter of 2016 witnessed the highest activity of the year, with PE investments of around 5 billion USD across 169 deals. Telecom accounted for a third of the investment value this quarter on account of Reliance Communications’ agreement to sell a majority stake in its tower assets housed under Reliance Infratel to Brookfield Asset Management for 1.7 billion USD. Financial services also witnessed significant activity, with 0.8 billion USD across 16 deals. PE exits saw a 34% decline in value and a 25% decline in volume as compared to the previous quarter. Q4 2016 reported 53 exits worth 1.6 billion USD, with manufacturing accounting for 45% of the exit value.
Despite decreased PE activity in 2016, investments across 2015 and 2016 broke through the 9–11 billion USD levels of the previous three to four years. Likewise, the exit levels across the two years have been significantly higher than those from previous years.
The Goods and Services Act, which is expected to come into play in 2017, will have a positive effect on India’s growth trajectory. Growth in businesses is expected to stabilise by mid-2017 after the sudden impact of demonetisation, which went beyond the traditional consumer-centric businesses. Availability of debt financing is likely to be higher in 2017 as banks attempt to increase the size of their loan book, thus increasing the likelihood of challenging non-banking finance channels.
The tax and regulatory frameworks for the real estate investment trust (REIT) and infrastructure investment trust (InvIT) regimes have been enabled, and 2017 is likely to see some public offers in the infrastructure space and possibly allow some existing private investors to exit.
Global political and economic volatility is likely to impact certain industry segments—primarily technology outsourcing and pharmaceuticals. Brexit and other global political changes hinge on nationalist fervour and could have an impact on the flow of funds into India in 2017. The much-anticipated interest rate hikes
PwC MoneyTree India – Q4 2016 4
in the US will perhaps be the biggest trigger for the flow of funds back to the US and potentially result in further depreciation of emerging market currencies, including the rupee.
The momentum towards the end of 2016 is expected to continue in the first few months of 2017, spurred by the tax exemption available on investments made until 31 March 2017 from Mauritius. The activity levels over the rest of the year will depend on how the Indian economy and, specifically, businesses respond to the expected volatility.
Sanjeev Krishan Leader, Private Equity and Transaction Services PwC India
PwC MoneyTree India – Q4 2016 5
2. Analysis of PE investments
Total equity investments in PE-backed companies The fourth quarter of 2016 proved to be a stellar one for Indian private equity (PE). Investments touched an annual high of 5.0 billion USD in 169 deals, a 47% increase in value terms and a 17% increase in deal volume compared to Q3 ’16, which saw investments worth 3.4 billion USD in 144 deals. Further, as compared to Q4 ’15 (where investments stood at 4.0 billion USD in 199 deals), the value of deals in this quarter has grown by 27%, although volume has declined by 15%. The average deal size for Q4 ’16 was 29.6 million USD.
The Telecom sector seized the top spot this quarter with Reliance Communications’ agreement to sell the majority stake in its tower assets housed under Reliance Infratel to Brookfield Asset Management for around 1.7 billion USD. The Information technology & IT-enabled services (IT & ITeS) sector dropped to the third rank in Q4 ’16, with an investment flow of 748 million USD in 96 deals. The sector witnessed a 40% decline compared to Q3 ’16 and the year-ago period in value terms, although there was a 22% spike in terms of number of deals compared to the previous quarter. The Fast-moving consumer goods (FMCG), Manufacturing and Energy sectors have all seen significant growth in Q4 ’16.
There was a significant rise in buyouts in this quarter—with a total of eight deals worth 2.2 billion USD. Overall, PE investments performed well as compared to both the previous quarter and the year-ago period, with late-stage investments worth 1.2 billion USD in 22 deals and growth-stage investments coming in third with 778 million USD in 32 deals. Early-stage investments remained sluggish, seeing 295 million USD in 95 deals.
Regionally, Mumbai continued to lead with around 2.6 billion USD, while the National Capital Region (NCR) stayed put at number two with investments worth 932 million USD. Gaining a slight edge over Bengaluru, Chennai climbed to the third spot in this quarter.
Total private equity investments (in US$ mn)
No.
of
deal
s
101 89
108 99
118 96
140
179
167
109
135 86
81
50
72
103
100 93
128
106
135
138
152
135
147
133
143
122
120
127
125
111
156
135
136
146
225
187
241
199
206
163
144
169
Data provided by Venture Intelligence
1,384
2,164
1,790
2,0062,578
2,128
4,577
5,403
3,825
2,7292,581
1,196755
814865
1,7492,114
2,198
2,397
1,948
4,273
2,565
3,952
1,853
2,314
2,165
4,026
1,384 1,299
4,848
1,571
2,3482,456
3,1722,882
4,4654,315
4,667
6,897
3,951
4,1804,460
3,400
4,999
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Q1
2006
Q2
2006
Q3
2006
Q4
2006
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Value of deals (in US$ mn)
Analysis of PE investments
PwC MoneyTree India – Q4 2016 6
Investments by industry Q4 ’15, Q3 ’16 and Q4 ’16
The Telecom sector emerged as a surprise winner in the last quarter of 2016, based purely on the strength of Brookfield’s 1.7-billion USD commitment to invest in Reliance Infratel. This single deal helped Telecom race past the front runner for the last two quarters—the IT & ITeS sector—which slipped to the third position. Although BFSI continued to hold on to the second position in Q4 ’16, attracting 846 million USD in 16 deals, this marked a 7% and 13% decline as compared to the previous quarter and year-ago period, respectively.
The IT & ITeS sector experienced a slump in this quarter, with 96 deals worth just 748 million USD. This was as against the average of around 1.2 billion USD the sector racked up across 79 and 122 deals in Q3 ’16 and Q4 ’15, respectively.
The FMCG sector displayed an enormous 3,430% jump over the past quarter, with investments worth 71 million USD in two deals. Energy and manufacturing also deserve a special mention, with both showing significant growth and finishing with 601 million USD in 10 deals and 393 million USD in seven deals respectively.
Investments by industry (in US$ mn)
Data provided by Venture Intelligence
1,247
356
1
973
27
217
80
103
57
39
414
437
1,255
140
0
908
88
265
21
42
271
2
26
382
748
601
1,673
846
393
196
11
22
9
71
36
393
0 500 1,000 1,500 2,000
Information technology (IT) & IT enabled services
Energy
Telecom
Banking, financial services & insurance
Manufacturing
Healthcare & life sciences
Food & beverages
Agri-business
Engineering & construction
Fast-moving consumer goods (FMCG)
Media & entertainment
Others
Q4 2015
Q3 2016
Q4 2016
Note: Others include Other services, Hotels & resorts, Sports & fitness, Agribusiness and Retail.
Analysis of PE investments
PwC MoneyTree India – Q4 2016 7
BFSI continues to be an area of focus, with ongoing investments every quarter. A growing economy and poor credit expansion by non-performing asset-hit banks, together with government reforms and a push on digital payments, should encourage more deals in 2017 in asset restructuring companies, real estate companies and non-banking financial companies, as well as fintechs. Bharti Gupta Ramola Leader, Financial Services PwC India
IT & ITeS companies, backed by a number of e-Commerce and Internet-based start-ups, have dominated PE investments over the last several quarters, accounting for a large share of deal volumes and deal values in 2016. This quarter, however, saw a decline in the total investment in the IT & ITeS space on account of issues with the valuation of e-Commerce companies and declining margins in IT & ITeS. It is expected that 2017 may experience a boost in investment activity in India. Further, sovereign wealth funds as well as pension funds are increasingly investing in companies directly instead of investing in PE firms, which might boost the growth prospects of the industry.
Sandeep Ladda Leader, Technology PwC India
Analysis of PE investments
PwC MoneyTree India – Q4 2016 8
Investments by stage of development Q4 ’15, Q3 ’16 and Q4 ’16
Buyouts were the top source of PE investment inflow in the fourth quarter of the year, with around 2.2 billion USD in eight deals. Late-stage investments came in next, having brought in 1.2 billion USD in 22 deals. In the third position, growth-stage investments attracted 778 million USD in 32 deals, showing a 35% decline in terms of value over the previous quarter. With 346 million USD across 10 deals, PIPE deals bounced back in this quarter, reflecting a 148% jump in value as compared to Q3 ’16.
Data provided by Venture Intelligence
367
1,179
1,605
0
452
209
138
285
1,200
1,449
0
139
282
45
295
778
1,202
0
346
2,173
204
0 500 1,000 1,500 2,000 2,500
Early
Growth
Late
Pre-IPO
PIPE
Buyout
Other
Q4 2015
Q3 2016
Q4 2016
Investments by stage development (in US$ mn)
Note: Definitions for the stage of development categories can be found in the ‘definitions’ section of this report.
Growth stage in the above graph includes both growth and growth-PE stages.
Analysis of PE investments
PwC MoneyTree India – Q4 2016 9
Investments by region Q4 ’15, Q3 ’16 and Q4 ’16
Regionally, Mumbai continued to outstrip the other cities by a large margin. With around 2.6 billion USD in 34 deals, the city enjoyed a remarkable 77% increase in investment value over the previous quarter. Coming in second place, NCR received 932 million USD. Chennai and Bengaluru followed with 243 and 210 million USD, respectively, the latter showing a 57% decline in PE investment value as compared to Q3 ’16.
Data provided by Venture Intelligence
754
1,877
448
70
76
726
487
1,441
982
71
184
236
210
2,556
932
74
243
983
0 500 1,000 1,500 2,000 2,500 3,000
Bengaluru
Mumbai
NCR
Hyderabad
Chennai
Others
Q4 2015
Q3 2016
Q4 2016
Investments by region (in US$ mn)
Note: NCR includes Delhi, Gurgaon and Noida.
Analysis of PE investments
PwC MoneyTree India – Q4 2016 10
Top 20 PE deals Q4 ’16
The top 20 deals comprised 76% of the total deal value in Q4 ’16. The top five deals together accounted for nearly 51% of the total deal value. The average deal value for this quarter was 29.6 million USD.
Top 20 PE deals in Q4 2016
Company Industry Investors Amount
(US$ mn)
Reliance Infratel Telecom Brookfield 1650
SBI Life BFSI KKR, Temasek 265
Sigma Electric Manufacturing Argand Capital Partners 250
Avantha Holdings - Promoter Holding Co Energy KKR 210
TVS Logistics Services Shipping & logistics CDPQ 155
C3 Connect IT & ITeS Everstone, Others 150
Hindustan Clean Energy Energy Farallon Capital, Merrill Lynch 130
ASK Group BFSI Advent International 125
Arvind Fashions Textiles & garments Multiples PE 110
Edelweiss Asset Reconstruction BFSI CDPQ 100
Azure Power Energy CDPQ 75
PNB Housing Finance BFSI General Atlantic 75
TrucksFirst IT & ITeS Warburg Pincus 75
ACME Cleantech Solutions Energy Piramal Enterprises 74
TVS Motors Manufacturing Cartica Capital 71
Vijaya Diagnostic Centre Healthcare & life sciences Kedaara Capital 63.5
Dialhealth Retail Everstone 63
Utkarsh Microfinance BFSI Faering Capital, Arpwood Capital, Others 60
Marico FMCG Cartica Capital 55.6
Freshdesk IT & ITeS Sequoia Capital India, Accel India 55
Data provided by Venture Intelligence
PwC MoneyTree India – Q4 2016 11
3. Analysis of PE exits
Total PE exits Q4 ’16 PE exits in the fourth quarter of 2016 were 34% lower in value than the previous quarter. In all, there were 53 deals worth 1.6 billion USD. In Q3 2016, the total exits were worth around 2.5 billion USD in 71 deals. Further, there was a 7% decline in value from Q4 ’15 (approximately 1.8 billion USD in 69 deals).
With 10 exit deals worth 720 million USD, the Manufacturing sector emerged at the top, followed by Healthcare & life sciences with 333 million USD in seven deals. IT & ITeS, which occupied the number one position in the last quarter, experienced a 94% decline in exit value in this quarter, with exits worth 53 million USD in 10 deals.
Public market sale was the most preferred exit route in this quarter, with a total value of 628 million USD in 31 deals. Secondary sale and strategic sale followed almost neck and neck, with total exit values of 488 million USD in eight deals and 483 million USD in 12 deals, respectively.
Total PE exits (in US$ mn)
No.
of
deal
s 21
18
23
32
35
39
38
33
34
15
21
11
17
42
32
31
48
37
44
61
34
33
31
31
46
35
34
37
37
41
22
34
27
61
49
54
68
71
55
59
39
49
63
Data provided by Venture Intelligence
554
574 607
948801
669
1,514
789 948
308 210268277
706 604
370
9731,005
1,227
3,079
780
1,080
795
431
1,324
403
1,4761,597
1,122
1,913
448
1,216
470
1,238
1,2891,331
1,978
3,977
1,8201,774
2,333
1,333
2,478
1,644
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Q1
2006
Q2
2006
Q3
2006
Q4
2006
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Value of deals (in US$ mn)
Analysis of PE exits
PwC MoneyTree India – Q4 2016 12
Exits by industry Q3 ’15, Q2 ’16 and Q3 ’16
The Manufacturing sector led exits by industry, with 10 deals worth 720 million USD. This was more than three times the exit value of Q3 ’16 (238 million USD in eight deals) and includes the exit of Blackstone from International Tractors and of Goldman Sachs from Sigma Electric—the top two exits in this quarter.
Healthcare & life sciences was the second largest sector for exits. In Q4 ’16, there were seven exits worth 333 million USD, including the exit of Cipla New Ventures from Chase Pharma. This represents a nearly 50% decline in value compared to the previous quarter, which saw exits worth 653 million USD in 10 deals. In Q4 ’15, there were a total of 10 exits worth 219 million USD.
BFSI came in third with 11 exits worth 264 million USD. While this was a negligible drop compared to the previous quarter (276 million USD in 13 deals), IT & ITeS witnessed a large decline in exits from 879 million USD in 18 deals in Q3 ’16 to 53 million USD in 10 deals in this quarter.
Data provided by Venture Intelligence
244
333
29
720
53
264
0
422
653
10
238
879
276
0
190
219
36
260
622
197
250
0 100 200 300 400 500 600 700 800 900
Others
Healthcare & life sciences
Energy
Manufacturing
IT & ITeS
BFSI
Telecom
Q4 2015
Q3 2016
Q4 2016
Exits by industry (in US$ mn)
Note: Others include Shipping & logistics, Other services, Retail, Food & beverages and Hotels & resorts.
Analysis of PE exits
PwC MoneyTree India – Q4 2016 13
Exits by type Q4 ’15, Q3 ’16 and Q4 ’16
Public market sale was the preferred exit route for PE investors in this quarter, with a total exit value of 628 million USD in 31 deals. In Q3 ’16, public market sale deals were worth 671 million USD in 37 deals, while in Q4 ’15, the figures were 632 million USD in 33 deals. Secondary sales saw exits worth 488 million USD in eight deals, while strategic sales saw 12 deals worth 483 million USD. Two exits worth 46 million USD were made via the buyback route in this quarter.
Data provided by Venture Intelligence
483
488
628
46
1,398
409
671
380
756
632
7
0 200 400 600 800 1,000 1,200 1,400 1,600
Strategic sale
Secondary sale
Public market sale
Buyback
Q4 2015
Q3 2016
Q4 2016
Exits by type (in US$ mn)
Analysis of PE exits
PwC MoneyTree India – Q4 2016 14
Top five PE exits Q4 ’16 The top five exits comprised 55% of the total exit value in Q4 ’16.
Top 5 PE exits in Q4 2016
Company Industry Investor Deal Amount
(US$ mn)
International Tractors Manufacturing Blackstone 250
Sigma Electric Manufacturing Goldman Sachs 200
Chase Pharma Healthcare & life sciences Cipla New Ventures 167
TVS Logistics Services Shipping & logistics Goldman Sachs, KKR 155
Endurance Technologies Manufacturing Actis 136
Data provided by Venture Intelligence
PwC MoneyTree India – Q4 2016 15
4. Active PE firms
Sequoia Capital India entered into 12 deals in this quarter; Kalaari Capital followed with six deals.
The most active PE investors in Q4 ’16 are listed at right.
Data provided by Venture Intelligence
* Number of deals includes both single and co-investments by PE firms. Cases where two or more firms have invested in a single deal are accounted for as one deal for each firm.
Investors No of deals Sequoia Capital India 12 Kalaari Capital 6 SAIF 6 Accel India 5 Quarizon 5 Aarin Capital 5 RB Investments 5 Axilor Ventures 5 India Quotient 5
IDG Ventures India 5 Omidyar Network 4
PwC MoneyTree India – Q4 2016 16
5. Sector focus – IT & ITeS sector
This quarter saw several major developments around the business and regulatory environment which might have a significant long-term impact on the technology and e-Commerce industry.
In this year’s budget, the government has given a big push to the digital economy. Plans that aim to promote the use of the Bharat Interface for Money (BHIM) app, AadhaarPay, introduction of point-of-sale terminals and related tax exemptions will have a positive impact on the economy. Demonetisation has also brought the digital agenda to the fore like never before. Moreover, the Finance Minister pointedly highlighted the low rate of tax compliance in the country in his budget speech. Hence, the government clearly recognises that quantum leaps in the levels of compliance and overall tax revenues can be achieved through digital payment infrastructure and the Goods and Services Tax (GST). With the setting up of a Payments Regulatory Board under the Reserve Bank of India, the narrative will remain centred around the digital economy in the short to medium term. Additionally, Make in India was given a significant boost in the budget through increased allocation for electronics manufacturing under incentive schemes like the Modified Special Incentive Package Scheme (M-SIPS) and Electronic Development Fund (EDF). For start-ups in the technology industry, carry forward of losses and profit-linked deduction for start-ups for three out of seven years will provide a boost.
Fintech start-ups have benefitted significantly from the government’s demonetisation move and with the rise in business, recruitment plans of these companies are likely to see a significant uptrend in the coming months. The e-Commerce industry in India is facing issues around valuation markdowns amid tough market conditions and slow growth, and several companies are rethinking their workforce strategies in order to control costs and improve operating fundamentals. The industry was also affected by demonetisation and with a cash scarcity in the markets, cash on delivery was impacted. Consolidation is also expected in the coming year, with many companies likely to come together either to fend off competition, enhance offerings, strengthen their market position or survive.
In terms of the international regulatory environment, with the new US government focusing on new immigration policies and visa reforms, many Indian IT companies might have to make changes to some of their business strategies and plans. The reforms might affect the mobility of tech specialists, and Indian technology companies will need to do some rethinking around hiring more local personnel and increasing wages, setting up offshore/near-shore centres, or outsourcing their work to American subcontractors, all of which could impact their capital expenditure and operating margins. A major part of the revenue of Indian IT firms comes from the US market, and at a time when the Indian IT sector is struggling with issues around declining profitability and market value erosion, the reforms could pose some core challenges.
Sandeep Ladda Leader, Technology PwC India
Sector focus – IT & ITeS sector
PwC MoneyTree India – Q4 2016 17
Total PE investments PE investments in the IT & ITeS sector witnessed a 40% drop in this quarter. There were a total of 96 deals worth 748 million USD. In comparison, there were 79 deals worth around 1.3 billion USD in Q3 ’16 and 122 deals worth 1.2 billion USD in the year-ago period.
The growth stage retained the top spot in terms of stage of investing, despite a 35% decline in terms of deal value. In all, this quarter saw 17 growth-stage deals worth 315 million USD. Early-stage investments, which came next, attracted 227 million USD in 73 deals. Further, there was a notable increase in buyouts in the IT & ITeS sector, with three deals amounting to 185 million USD in Q4 ’16.
In terms of region, NCR led the race in this quarter with respect to deal value, and Chennai displayed a substantial jump compared to the previous quarter. Finally, in terms of subsector, Online services attracted the highest investment in this quarter, receiving 366 million USD across 52 deals. At the other end of the spectrum, IT services faced a dry spell.
The average deal size this quarter was around 7.8 million USD compared to about 15.9 million USD in the last quarter.
In Q4 ’16, funding growth for the IT & ITeS sector and overall PE investment moved in opposite directions. While tech investment dropped by 40% compared to the last quarter, total PE funding enjoyed a 47% increase
No.
of
deal
s 28
18
35
21
34
35
35
32
33
27
47
26
24
16
21
21
28
16
36
24
40
47
43
43
47
49
60
40
44
43
48
48
70
61
78
79
114
106
119
109
103 92
Data provided by Venture Intelligence
.
217
850
366151
625 647
307
233
555
353
422165
9965
397
106273
111148311
791
347515
443
303
312
2,423
181 150
481
648
988985
772
1,568
2,635
1,992
1,893
3,846
1,247
1,4671,645
1,255
748
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Q1
2006
Q2
2006
Q3
2006
Q4
2006
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Value of PE Investments in IT & ITeS sector (in US$ mn)
Value of PE Investments in IT & ITeS sector (in US$ mn)
Sector focus – IT & ITeS sector
PwC MoneyTree India – Q4 2016 18
Investments by stage of development Q4 ’15, Q3 ’16 and Q4 ’16
Growth-stage deals were the preferred mode of entry into the IT & ITeS segment in this quarter. In total, there were 17 deals worth 315 million USD. This marked a 35% drop in value compared to Q3 ’16, which saw the same number of deals bring in 488 million USD. However, growth stage witnessed an 18% increase in value compared to the year-ago period, which saw 15 deals worth 268 million USD.
Early-stage investments, which attracted 227 million USD in 73 deals, came in next. Buyouts more than doubled in value from 90 million USD in the previous quarter to 185 million USD in this one.
Lastly, both PIPE and late-stage deals showed a steep fall in this quarter—with 11 million USD in one deal (Q3 ’16: 30 million USD in 1 deal) and 10 million USD in two deals (Q3 ’16: 428 million USD in four deals), respectively.
Data provided by Venture Intelligence
Investments by stage of development (in US$ mn)
11
10
315
227
185
5
30
428
488
214
90
3
148
527
268
302
0 100 200 300 400 500 600
Other
PIPE
Late
Growth
Early
Buyout
Q4 2015
Q3 2016
Q4 2016
Sector focus – IT & ITeS sector
PwC MoneyTree India – Q4 2016 19
Investments by region Q3 ’15, Q2 ’16 and Q3 ’16 With 177 million USD in 25 deals, NCR remained the top region for tech investments. However, the gap between NCR and the other cities was narrower in Q4 ’16. Bengaluru and Mumbai came in second and third place, with 119 million USD in 28 deals and 110 million USD in 19 deals, respectively.
Data provided by Venture Intelligence
277
64
177
110
119
123
13
635
242
243
412
50
144
189
452
0 100 200 300 400 500 600 700
Others
Chennai
NCR
Mumbai
Bengaluru
Q4 2015
Q3 2016
Q4 2016
Investments by region (in US$ mn)
Sector focus – IT & ITeS sector
PwC MoneyTree India – Q4 2016 20
Investments by subsector Q4 ’15, Q3 ’16 and Q4 ’16
Online services emerged as the clear front runner in Q4 ’16, with 366 million USD in 52 deals. Mobile VAS, which was the top subsector in the previous quarter, slipped to the fourth position in this quarter.
Investments by subsector (in US$ mn)
Data provided by Venture Intelligence
41
128
47
166
366
34
31
133
588
115
354
75
305
39
89
270
469
0 100 200 300 400 500 600 700
Other
IT services
Enterprise software
Mobile VAS
BPO
Online services
Q4 2015
Q3 2016
Q4 2016
Sector focus – IT & ITeS sector
PwC MoneyTree India – Q4 2016 21
PE exits in the sector Q3 ’15, Q2 ’16 and Q3 ’16As compared to Q3 ’16, there was a sharp drop in exits in the IT & ITeS sector in Q4 ’16. The sector saw exits worth 53 million USD in 10 deals compared to 879 million USD in 18 deals in the previous quarter. Strategic sales remained the preferred exit route—with nine deals worth 33 million USD.
No.
of
deal
s 8 4 3 12 5 6 8 8 7 6 11
12 9 16 7 8 9 5 4 3 5 4 8 8 14
11 4 13 9 8 4 9 11 9 8 9 5 10 9 7 9 14 6 15
18
15 9 16
13
14
18
10
Data provided by Venture Intelligence
93176
227726
29
679
58
316379
81 10578261 287
561967
121232
25162
48
393225156
1,719
340
612
154 96129
106
1,056
258
225
519
194
498
181185
10
448
685
1,944
103
622
440
98
879
53
0
500
1000
1500
2000
2500
Q1
2004
Q2
2004
Q3
2004
Q4
2004
Q1
2005
Q2
2005
Q3
2005
Q4
2005
Q1
2006
Q2
2006
Q3
2006
Q4
2006
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Value of deals (in US$ mn)
PE exits in the sector (in US$ mn)
PwC MoneyTree India – Q4 2016 22
Definitions
Stages of development Early stage – This refers to the first or second round of institutional investments in companies that adhere to the following: • Less than five years old • Not part of a larger business group • Investment is less than 20 million USD
Growth stage – This refers to investments of less than 20 million USD. Also, investments meeting the following criteria are considered to be in the growth stage: • Third or fourth round funding of
institutional investments • First or second round of institutional
investments in companies that are more than 5 years old and less than 10 years old or spin-outs from larger businesses
Growth stage PE: This includes the following: • First or second round of investments worth 20
million USD or more • Third or fourth round funding in companies
that are more than 5 years old and less than 10 years old, or subsidiaries or spin-outs from larger businesses
• Fifth or sixth round of institutional investments
Late stage – This comprises the following: • Investment in companies that are a decade old • Seventh or later round of institutional
investments
PIPEs – The following constitute PIPEs: • PE investments in publicly listed companies via
preferential allotments or private placements • Acquisition of shares by PE firms via the
secondary market
Buyout – This is an acquisition of controlling stake via purchase of stakes of existing shareholders.
Buyout–large – This includes buyout deals of 100 million USD or more in value.
Other – This includes PE investments in special purpose vehicle (SPV) or project-level investments.
Types of PE exits
Buyback – This includes the purchase of PE or VC investors’ equity stakes by either the investee company or its founders or promoters.
Strategic sale – This includes the sale of PE or VC investors’ equity stakes (or the entire investee company itself) to a third-party company (which is typically a larger company in the same sector).
Secondary sale – Any purchase of PE or VC investors’ equity stakes by another PE or VC investors constitutes secondary sale.
Public market sale – This includes the sale of PE or VC investors’ equity stakes in a listed company through the public market.
Initial public offering (IPO) – This includes the sale of PE or VC investors’ equity stake in an unlisted company through its first public offering of stock.
www.pwc.com/ globalmoneytree www.pwc.in
Contacts Sandeep Ladda Leader, Technology PwC India [email protected]
Sanjeev Krishan Leader, Private Equity PwC India [email protected]
This report was researched and written by the following:
Pradyumna Sahu Executive Director, Markets & Industries PwC India [email protected]
Dion D’Souza Manager, Markets & Industries PwC India [email protected]
Jitesh Bijlani Knowledge Manager, Technology PwC Inida [email protected]
About PwC’s Technology Institute
The Technology Institute is PwC’s global research network that studies the business of technology and the technology of business with the purpose of creating thought leadership that offers both fact-based analysis and experience-based perspectives. Technology Institute insights and viewpoints originate from active collaboration between our professionals across the globe and their first-hand experiences working in and with the technology industry. For more information, please contact Raman Chitkara, Global Technology Industry Leader, at [email protected]
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 223,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com
In India, PwC has offices in these cities: Ahmedabad, Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune. For more information about PwC India’s service offerings, visit www.pwc.com/in
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