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Silicon Valley-size deals are still a pipe dream for India’s IT sector

India-IT-investment-private-equity
Reuters/Adnan Abidi
Lot of mass, low value
Published This article is more than 2 years old.

The Indian information technology (IT) sector is seeing a flurry of deals—private equity (PE) investments, mergers and acquisitions (M&A), and investor exits. However, in value terms, this activity is small change compared to other industries.

During the three months ended June 30, the IT sector witnessed 129 private equity deals but they had a combined value of just $408 million (Rs2,591 crore)—far lower than the value of deals in the consumer discretionary and financial sectors.

The total value of PE investments in the consumer discretionary sector was $1.11 billion (Rs7,049 crore) while the financial sector saw investments worth $709 million (Rs4,503 crore), according to VCCedge’s quarterly deal update report.

Here is an industry-wise break-up of the PE deals during the second quarter of the 2016 fiscal:

With low values, only one IT sector deal—the $150 million raised by online classifieds portal Quikr—made it to the list of the top 10 PE investments in India during the second quarter.

Some of the significant PE investments in April and May 2015 were the $500 million (Rs3,176 crore) invested by Carlyle International Energy Partners in oil and gas services company Magna Energy, and India Value Fund Advisors and TA Associates’ $500 million investment in broadcasting firm Atria Convergence Technologies.

Exits

The IT sector led the volume scorecard for PE investor exits in the second quarter with 12 deals. However, in value terms it was again behind the financial, materials, and consumer discretionary sectors.

The chart below shows the industry-wise PE exit trends during the second quarter.

PE firm Tiger Global Management LLC’s divestment of $94 million (Rs597 crore) in Just Dial through open market was the only IT sector deal that featured among the top 10 exits during April-June 2015.

M&A

The IT sector saw 53 M&A deals in the period. This was much higher than the numbers reported in the telecommunications service sector (7) and in the healthcare sector (20).

However, deals in the IT sector were worth just $198 million (Rs1,258 crore) against $720 million (Rs4,573 crore) in the telecommunications services sector and $637 million (Rs4,046 crore) in healthcare.

Here is a break-up of industry-wise M&A deal values and volumes during April 2015 and May 2015 in India:

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