2015-05-06-Bain-India_Private_Equity_Report_2015_64页_17mb

Summary of India Private Equity Report 2015

Core Content

This report provides an in-depth analysis of the Indian private equity (PE) landscape in 2015, highlighting macroeconomic trends, the performance of the PE industry, and the role of key sectors like consumer technology.

Main Points

Global Economic Trends

• The global economy showed slow but stable growth in 2014, with a 2.4% increase in global GDP.
• Developed economies grew slightly more than 1.5%, while emerging economies like BRICS and MINT experienced slower growth compared to previous years.
• Global buyout activity remained mostly flat, but the Asia-Pacific region saw a significant increase in deal value, rising by 63%.
• India's PE market, including real estate and infrastructure, experienced a 28% increase in deal value, reaching $15.2 billion, the highest in five years.

India's PE Landscape

• The Indian PE and VC industry is on a recovery path, with strong growth in both deal value and volume.
• The number of funds investing in India rose by nearly 30% in 2014, with close to 50% of the funds being new entrants.
• Early- and growth-stage deals accounted for 80% of total deals in 2014, indicating a shift in investment focus.
• GPs expect continued growth in deal activity in 2015, driven by macroeconomic conditions, improved exit environments, and positive investor sentiment.
• However, challenges such as valuation mismatches and a competitive market for quality deals persist.

Fund-Raising

• Funds focused solely on India saw a significant increase in capital raised, doubling compared to 2013.
• India-focused PE firms raised $8 billion in dry powder in 2014, reflecting a high level of investment activity.
• GPs are optimistic about 2015, citing track record, team expertise, and exit success as key factors in fund-raising.
• Regulatory challenges, macroeconomic uncertainties, and longer investment cycles remain obstacles for raising India-specific funds.

Deal Making

• Deal volume in India increased by 14%, with the consumer technology sector leading the way.
• Deal value rose by 28%, primarily due to the consumer technology, BFSI, and real estate sectors.
• The top 25 deals (excluding real estate) accounted for 49% of total investments, with Flipkart receiving the largest investment of $1 billion.
• The average deal size increased from $41 million to $53 million, driven by large investments in the consumer technology sector.

Portfolio Management and Exits

• The number of exits increased by 14%, but the value of exits dropped by 22% due to the decline in the value of unexited pre-2008-vintage deals.
• Public market sales became more prominent, accounting for six of the top ten exits in 2014.
• GPs expect a further increase in the significance of IPOs and strategic sales, while promoter buybacks are expected to decline.
• The exit environment remains challenging, and the pressure to exit is expected to rise. A lack of viable exits could lead to a shakeout in the industry as fund tenures expire.

Focus on Consumer Technology

• The consumer technology sector is a major driver of PE and VC investments in India.
• It includes e-commerce, social connectivity, content generation, and wearable technology.
• Investments in the sector almost quadrupled from $1.2 billion to $4.7 billion in 2014.
• The sector contributed 31% to overall deal value and 35% to overall deal volume.
• Major companies like Flipkart and Snapdeal saw significant valuation increases, with Flipkart's valuation rising over fivefold in 2014.
• GPs expect valuations in the consumer technology sector to remain high, with 80% of surveyed funds anticipating further increases in the next one to two years.

Key Information

• GDP Growth: India's GDP grew by 6.6% in 2014, with the services sector contributing over 50% to GDP.
• Stock Market: The Indian stock market delivered over 30% returns in 2014, among the highest in emerging economies.
• Inflation: Inflationary pressures eased significantly in 2014, reaching a low of 5%.
• FDI Inflows: PE accounted for 53% of FDI inflows in 2014, totaling nearly $29 billion, the highest in five years.
• Investor Sentiment: Positive investor sentiment and a stable government are seen as key drivers for future growth.
• Regulatory Reforms: The "Make in India" initiative and reforms in labor laws and GST are expected to improve the business environment.

Conclusion

The Indian PE market is in a strong recovery phase, driven by favorable macroeconomic conditions, a vibrant entrepreneurship ecosystem, and a booming consumer technology sector. Despite challenges such as valuation mismatches and competition, the outlook for 2015 remains positive. Continued improvements in the regulatory and business environment are essential for sustaining this growth and attracting more investments.