The year 2011 had seen 454 PE deals worth $9.4 billion with both volume and value up 12 per cent, compared to 2010 (we kept tabs till Dec 10, 2011). While PE deal-making surpassed the volume and the value of the entire CY2010 in the first three quarters of 2011, the momentum slipped during the fourth quarter.
In terms of value, infrastructure continued to attract the big dollar inflow. However, the action was shifting towards transportation and alternative energy in contrast to conventional energy play that ruled 2010. The year also witnessed increased interest from global buyout shops who continued to dominate the manufacturing space with two big-ticket deals.
Incidentally, the ranking below is based on the announced deal value. If the deal value is not known, it will not reflect. The list also takes into consideration development finance institutions and sovereign wealth funds as they have been active investors in India over the past decade. We have only considered private equity transactions for this ranking.
Bain Capital Management ($595 million): Private equity giant Bain Capital started 2011 with a bang by clinching a deal to take an indirect stake in two-wheeler major Hero MotoCorp. It is also the largest PE deal of the year and one of the single largest commitments by a PE firm in India. Along with Government of Singapore Investment Corp (GIC), Bain Capital backed Hero Group’s Munjal family to fund its acquisition of Honda Motors’ 26 per cent stake in its Indian joint venture. The transaction for India’s largest two-wheeler manufacturer was hotly contested with other buyout shops in India as it was one of the rare occasions where a big corporate house sought PE bucks.
However, towards the end of 2011, Bain Capital entered into a bitter legal spat with the promoters of the kidswear company Lilliput Kidswear Ltd where it had invested $86 million in 2010, along with TPG Growth.
Blackstone Advisors India ($553 million): The year 2011 was an eventful period in India for Blackstone, the world’s largest alternative asset manager, as it completed its first exit since setting up its India office six years ago. The exit came with the sale of the BPO firm Intelenet to UK’s Serco. But Blackstone also remained busy in terms of investments, closing deals worth $400 million.
The real estate arm of the PE firm is turning fairly aggressive now, closing two of largest PE real estate deals in the country. Blackstone picked up $200 million (Rs 875 crore) stake in a special economic zone (SEZ), promoted by Bangalore-based real estate developer Embassy Property Developments in what turned out to be the largest private equity deal in India’s real estate space during the past three years.
It followed it up by buying DLF Ackruti Info Parks (Pune) Ltd, an IT special economic zone in Pune from realty major DLF Ltd and its joint venture partner Hubtown Ltd for Rs 810 crore ($153 million).
Blackstone’s focus on infrastructure space also continued as it invested $111 million in VISA Power Ltd, an independent power producer and a part of the $1.1 billion Kolkata-based Visa Group. It also acquired stake in Monnet Ispat and invested in the latter’s power utility subsidiary in 2010. Blackstone further invested $33 million (Rs 150 crore) in FINO Ltd that provides technology solutions for banks and microfinance institutions. However, it was the PE firm’s smallest deal in India.
JPMorgan Chase & Co ($550 million): The private equity arm of JPMorgan has become an aggressive investor in the Indian infrastructure sector over the past 12 months, closing three deals. Its largest deal came when it pumped in $400 million in Nikhil Gandhi-promoted SKIL Infrastructure that has interests in areas like ship-building, education and defence. SKIL holds stakes in listed firms like Pipavav Defense, Offshore Engineering Ltd and Everonn Education.
Another large deal included investing $110 million (around Rs 500 crore) into Hyderabad-based Soma Group, which is involved in construction & development of infrastructure projects in transportation, hydel power and water resource space. The investment by JPMorgan was in Soma’s highway projects unit with a portfolio of BOT (build, operate, transfer) projects in the highways and road sector.
Standard Chartered Private Equity ($360 million): For the private equity arm of London-headquartered bank Standard Chartered Plc., which invests from its balance sheet in India, the year 2011 could well be the record year for investments in the country. The PE firm operates two teams in India – a mid-market investment team that invests in deals up to $25 million and another team that looks at larger transactions.
SCPE’s large investments during the year included Redington India, GMR Airports Holding and Varun Beverages (International) Ltd. Recently, it also invested $70 million in a subsidiary of London-listed clean energy producer Greenko Group PLC in a structured transaction. Other investments during the year included Bush Foods, Privi Organics and Innoventive Industries.
Apollo Management LP ($350 million):
While striking its second deal in India, private equity giant Apollo Global Management said that it was looking to invest $500 million in BK Goenka-promoted Welspun Group – a $3 billion group which has diversified interests in various segments, from pipelines to textiles to infrastructure.
Apollo invested $290 million in Welspun Group’s flagship Welspun Corp Ltd, betting on a backward integration strategy. It also committed another $60 million to Welspun Maxsteel, which is being acquired by Welspun Corp for the company to become a vertically integrated manufacturer in the oil and gas line-pipe industry.
The PE firm is also looking at sectors like chemicals, oil & gas, metals & mining, financial & business services and media distribution. Incidentally, Apollo has formed a JV with ICICI Venture for a special situations fund while a NBFC is also on the cards.
Goldman Sachs ($264 million): Goldman Sachs invested over $200 million in renewable energy start-up ReNew Wind Power Pvt Ltd, founded by prominent deal-maker and former Suzlon Energy COO Sumant Sinha. The deal marked the single largest private investment in the renewable energy sector in India while Goldman became a majority shareholder in ReNew. Incidentally, Goldman Sachs has invested over $1.5 billion in alternative/clean energy-related companies globally.
The transaction came after Goldman Sachs invested $425 million as part of a consortium in Asian Genco Pte Ltd that owns a 4000 MW portfolio of power generation assets. The deal diversifies Goldman’s bet on the Indian power sector.
In addition, the principal investments unit of Goldman, which picked up stake in Analjit Singh’s Max India last year through fresh issue, boosted its holding by taking a secondary stake from exiting investor Warburg Pincus.
International Finance Corporation (IFC): 16 Deals
Even with the proliferation of private equity and venture capital funds in India, IFC remains to be the most active deal-maker in the country. The private sector investment arm of the World Bank Group closed 16 deals in 2011, with another five announced deals pending approval. However, this does not include its fund-of-funds operations where it invests in private equity funds as a Limited Partner.
Incidentally, most investments by IFC covered the microfinance and the clean energy markets in India. These included Bhartiya Samruddhi Finance, Utkarsh Micro Finance, Simran Wind Project and Shalivahana Green Energy, among others. Its largest investment was $45 million in Kolkata-based non-banking finance company Magma Fincorp.
Sequoia Capital India: 12 Deals
Sequoia Capital closed 11 transactions in the growth capital space which also included open market investments. The Silicon Valley-headquartered blue chip venture capital firm manages growth funds in India with a total corpus of $1.13 billion. In 2011, Sequoia Capital invested across sectors like healthcare, food & beverages, engineering and infrastructure from these funds. Some of the key investments done by Sequoia included Moolchand Hospitals, Prakash Snacks, Lovable Lingerie (pre-IPO), TD Power Systems (IPO), PI Industries Ltd, Amara Raja Batteries and Pratibha Industries (open market).
Standard Chartered Private Equity: 7 Deals
Besides closing seven transaction in one of its busiest years in India, SCPE also recorded an exit when Actis acquired its stake in privately held auto component maker Endurance Technologies Ltd for $71 million. SCPE also completed its exit from ABG Shipyard. Its India head Nainesh Jaisingh was also elevated to the position of global co-head.
Matrix Partners India: 6 Deals
For Matrix Partners, 2011 was a busy year with the fund closing six new deals. And in all six, Matrix was the first institutional investor, a strategy that the investment firm seems to be increasingly following. Two of its portfolio companies that listed in 2011 – namely, Muthoot Finance and Tree House Education – also count Matrix as their first and largest institutional shareholder.
Matrix's investments included Rs 60 crore in TCNS Clothing Company (it manufactures and markets contemporary women’s wear brand W), Rs 45 crore in Kids Clinic India (specialising in maternity and infant care) and Rs 50 crore in Maharana Infrastructure and Professional Services (an education service provider), among others.
In addition, Matrix Partners India also closed a $300 million second fund, taking its total assets under management to $600 million across the two funds.
Blackstone Advisors India: 5 Deals
Blackstone has been consistently the largest private equity investor in India since setting up shop in India in 2006, doing a mix of large growth and buyout deal. This year it also did a open market transaction, which might be the first for the fund in India.
Blackstone's real estate dominated the dealmaking this year, closing two large transactions worth over $350 million in two IT special economic zones. While one deal was a buyout, other was a for a significant minority stake.