Though the Sensex closed 2009 with a 81 per cent gain thanks to renewed FII inflows in the second half of the year, this recovery in the primary markets did not help the PE activity. The number of Private Equity deals (PE) in 2009 slid to a 4-year low, according to a new report on PE activity in India.
Despite a surge in the secondary market in response to negative investor sentiments, the PE market witnessed just 191 deals in 2009 compared to 312 and 405 PE deals in 2008 and 2007 respectively, according to a report from financial and investment advisory ARC Financial Services. This was a decline of 39 per cent over 2008 and 53 per cent on 2007 levels.
In terms of deal value, 2009 raised $3.35 billion from the market — the lowest in the last four years — as compared to $10.59 billion in 2008 and $19.03 billion in 2007. Out of the 191 deals, as many as 118 came in the second half of 2009, garnering $1.8 billion and accounting for more than 50% of the total deal value in 2009.
Telecom, Media & Technology emerged as the hottest sector of 2009, according to the report. It accounted for 60 deals in 2009 and following close on its heels was Industrials at 43 deals. Telecom, Media & Technology sector witnessed 31.4% of total deals followed by Industrials and Real Estate & Infrastructure with 22.5% and 11.5%.
The Indian PE market remained mostly lackluster throughout 2009, where it only picked up in the second half of the year. The average deal size in 2009 declined by 48.4 per cent to $17.5 million from $33.9 million in 2008. The average deal size in last five years was highest in 2007 at $47 million.
With PE activity seeing a slight up tick in Q4 Dec'09, in terms of both value and volume, analysts expect the PE activity in 2010 to come close to the 2007 levels. Combined with the increase in liquidity in the markets and stabilisation in the secondary markets, these factors are expected to increase the private inflow of money more easily in 2010.
Globally, the total number of PE deals fell significantly from 4,790 in 2008 to 2,970 deals in 2009. The deal value too came down, falling from $323 billion in 2008 to $147 billion in 2009, nearly 55% decline. India accounted for 6 per cent of total global PE deals volume in 2009, while only 2 per cent in terms of deal value. The deal activity in India declined by 39 per cent and 68 per cent in terms of deal volume and deal size respectively in 2009 as compared to 2008.
