Indian deal volume plummets

The South Asian nation had a 45% drop in total deal value and a 24% decline in the total number of deals announced in 2008 compared to 2007. Real estate and infrastructure received total investments of $3.3bn.

Private equity firms announced deals worth $10.4 billion in India from January until 15 December 2008, according to a study. The figure marks a 45 percent drop compared to 2007, when private equity deals worth a total of $19 billion were made.

In 2008, a total of 306 private equity deals were announced, according to data from accounting firm Grant Thornton, compared with 405 private equity deals in 2007. The 24 percent decrease in the total number of deals was due to the recent economic downturn, the report noted.

The average private equity deal size decreased from $47 million in 2007 to $34 million last year. The drop in the total value of deals is due to the fact that “the billion dollar deals that were seen last year (2007) were missing this year (2008) and the significant decline has come only from the second half of 2008,” CG Srividya, partner of specialist advisory services at Grant Thornton, said.

The largest private equity investment in India last year was Providence Equity Partners’ $640 million investment in Aditya Birla Telecom for a 20 percent stake. London-based Symphony Capital’s $450 million investment in construction firm DLF was the second largest private equity investment in 2008.  The third largest deal last year was also made in the real estate sector. MPC Synergy, a joint venture between Germany’s MPC Capital and Switzerland’s Synergy Asset Management, invested $325 million in Phoenix Mills, a mall and retail space developer.

The real estate and infrastructure sectors were most popular in terms of investments and received a total of $3.3 billion, according to the study. The telecom sector was next with investments worth $1.4 billion; power and energy followed with $900 million; banking and financial services $819 million; IT and IT-enabling services $489 million; and manufacturing $410 million.

However, IT and IT-enabled services saw the highest number of deals at 55, followed by real estate and infrastructure at 50 and banking and financial services at 32.

Srividya said there is currently a valuation gap in expectations between investors and companies, and added that deal flow is likely to pick up again in the medium term.