Consumer tech and BFSI drive another year of private equity growth in India

20 May 2019 Consultancy.in

A new report from global management consultancy Bain & Company has revealed that the growth in India’s private equity sector in 2017 continued through the course of last year, driven by a handful of the biggest deals. The sector surpassed the $26 billion mark last year, which is the second highest annual figure in the last decade.

Private equity numbers have been up across the globe in recent years, and the Indian market has been amongst the top contributors to this growth from the Asia Pacific region. Bain & Company monitors global private equity growth on an annual basis, and has been reporting steadily rising numbers for India.

Last year, the firm reported that funds raised in the Indian market alone amounted to nearly $6 billion, representing a staggering 50% increase from the year before. The latest report, which examines the sector’s performance through 2018, reports a similar growth trajectory for the sector.Investment momentum in 2018

In addition to linear growth, Bain reports that private equity growth is also taking on a more diverse composition. Where the traditional contributors to the sector have hailed from the banking, financial services and insurance sectors (BFSI), last year saw an increase in activity from a number of others.

Among the prominent sectors outside of the BFSI domain was the consumer retail segment. Rapid economic growth and the resultant growth in disposable income levels and urbanisation have all combined to drive a substantial increase in consumer spending across India.

As a result, the sector is in the midst of growth through both organic and inorganic means. Other sectors that have seen spikes in private equity activity are the healthcare sector and the energy sector. The latter is currently drawing substantial investment as the government looks to achieve its renewable energy targets for this decade.Deal volume increased in 2018, and deal value declined slightly

Across all sectors, the one segment that saw the bulk of private equity deals was the consumer technology domain, presumably brought about by a rampant wave of digitalisation. Nevertheless, the segment did not see any deals of mammoth volume, which drove growth in 2017.

According to the report, there are promising signs when it comes to investor sentiment in the Indian market, demonstrated by the high exit values for last year. Bain reports that exit values last year were the highest that they have been in a decade, boosted by the sale of Flipkart to Walmart for $16 billion.

This investor sentiment manifested itself in the high investment values for the sector last year. As per the report, the total value of investment drawn was in excess of $26 billion, which was generated by nearly 800 deals across the market – a significant increase from the 2017 figure.Investments in consumer tech

40% of this investment value, meanwhile, stemmed from just 15 of the biggest deals in the country, all of which were situated in the consumer technology and the BFSI segments. Nevertheless, the absence of a mega deal brought a dip in consumer technology investments of $2 billion from 2017.

“We believe there is sufficient India-focused dry powder to ensure high-quality deals don’t lack capital. Our surveyed funds identified BFSI, consumer/retail and healthcare as attractive investment sectors in the future. Consumer tech will also continue to see investments into scaled players,” said the report. 


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