It is time for a recap of the year that was (2010). In many ways, 2010 signalled a revival in private equity deal-making activity after it suffered a big-time lull in 2009 following the global credit crisis. This revival has seen deal value doubling in 2010  as opposed to 2009 when it slipped to its lowest levels.

Let's take a look at the scorecard of the year. In 2010 calendar year, there have been 406 private equity and venture capital deals with disclosed value of $8.62 billion in India as compared to 287 deals of $4.4 billion in 2009, according to the first glance of data from VCCEdge. This represents a 96% increase in deal value and a 41% increase in deal volumes. However, the deal value is still way behind compared to 502 deals with a total disclosed value of $11.98 billion in 2008 and 488 deals with an announced value of $15.61 billion in 2007 when deal-making peaked.

But, the good news is that the 2010 deal value high comes despite several mega-deals falling through after the announcements.  Tata Power terminated its deal to raise $300 million by selling stake in two separate special purpose vehicles to private equity firm Olympus Capital. The $85-million deal between Fortis Healthcare and Singapore state investment arm GIC was also scrapped.

Venture Capital Deals Too See Pickup

While the private equity deal volumes certainly increased this year, there was also a pick up in venture capital deals. Out of the total $8.62 billion invested in 2010, $7.55 billion was accounted for by deals by PE firms and around $481 million by venture capital investments. The rest constitutes angel investments and other PE type deals.

The VC funding shows an increase of 55% over 2009. VC investments in India halved in 2009 when value fell from $660 million in 2008 to $310 million in 2009. The year also several firms doing their growth capital rounds as valuations stabilised.

Comeback Of Blockbusters

2010 also saw mega-deals coming back as capital-intensive infrastructure plays continued to be favourite among PE firms. There were 20 deals over $100 million in 2010 as compared to 9 deals in the similar range in 2009. But these still have to match the highs of 2008 when there were 25 deals over $100 million. There were a total 41 deals over a size $50 million in 2010, aggregating to a significant majority of deal making in terms of value at $4.9 billion.

2010 literally saw power-packed dealmaking in terms of deal values, with 20% or deals worth $1.72 billion in the power utility sector. The segment also saw the largest PE deal of year when a consortium led by Morgan Stanley Infrastructure Partners invested $425 million in Asian

Genco. Global private equity major Blackstone has been the most active dealmaker in the sector with $360 million across two deals already.

2010's Hot Sectors

Sectors that kept dealmakers busy were consumer discretionary, financial services, real estate and healthcare.

As PE firms continued to chase the domestic consumption theme, consumer discretionary sector naturally saw frenetic activity with 73 deals worth $1.21 billion. These included investments speciality retail outfits in areas like kidsweear (Lilliput), coffee chains (Coffe Day Holdings), salons (Enrich), among others. Education theme was also actively chased by PE firms, especially with a number of deals in the sub-$10 million category with the space seeing 23 deals worth $190 million in 2010. Consumer staples sector also 19 deals worth $328 million with continued interest in agri-related firms.

Real estate sector saw a revival in dealmaking as compared to 2009 but PE firms remained cautious about investing as the sector still has to show returns. It saw 42 deals worth $1.31 billion dominated by investments in residential realty.

Healthcare sector also interest increasing among PE firms with 34 deals worth $481 million in 2010. The PE players showed a preference towards asset light plays like diagnostic chains and day care surgery surgery centers. Early investors in diagnostic chains like Metropolis

Healthcare and Dr. Lal Pathlabs, both of which saw secondary deals, made good returns.

Financial services sector also saw deals 54 deals worth $972 million in areas like microfinance, credit rating, commodity and energy exchanges, insurance firms and housing finance companies.

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