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www.pwc.com/globalmoneytree www.pwc.in PricewaterhouseCoopers India Pvt Ltd MoneyTreeTM India Report Q2 2016 Data provided by Venture Intelligence Technology Institute This special report provides summary results of Q2 ’15, Q1 ’16, and Q2 ’16. Table of contents 1. Overview 3 2. Analysis of PE investments 4 Investments by industry 5 Investments by stage of development 7 Investments by region 9 Top 20 PE deals 3. Analysis of PE exits 11 Exits by industry 12 Exits by type 13 Top five PE exits Q2 ’16 14 4. Active PE firms 15 5. Sector focus: IT & ITeS 16 Total PE investments 17 Investments by stage of development 19 Investments by region 20 Investments by subsector 21 PE exits in the sector 22 Definitions PwC MoneyTreeTM India Report – Q2 ’16 10 23 2 1. Overview Indian private equity did reasonably well in the second quarter of 2016, with overall investments worth 4.3 billion USD across 147 deals. Despite ecommerce/consumer Internet investments slowing down considerably owing to valuation and profitability concerns, the IT & ITeS sector continued its dominance over other sectors with investments of 1.6 billion USD, primarily driven by the 1.1-billion-USD buyout of Mphasis by Blackstone. This decent showing is despite the absence of a number of hedge funds that had joined the e-commerce bandwagon last year. Financial services continues to be a favoured sector among growth/late-stage growth investors, and this mirrors the expected growth in the economy. Nonbanking financial companies, microfinance and fintech are subsectors which continue to see significant interest. Logistics and consumer are two other sectors which could contribute to investment growth in the next half of the year with a combination of primary and secondary investments—in particular, the Goods and Services Tax Bill (GST) has the potential to spur logistics deals. At 1.2 billion USD across 40 deals, exits for the quarter saw a 54% drop as compared to the previous quarter. But, interestingly, this quarter saw four PE-backed IPOs, and, as the markets continue to climb, more of these can be expected. Buoyant stock markets are a challenge as well, as many promoters look at IPOs as opposed to raising private money in such situations. The outlook for the rest of the year remains positive as India remains firm on its growth agenda. We see a number of pension and sovereign wealth funds setting up Indian offices and starting to invest directly in the country—some of these are focussing on extracting good businesses from the stressed balance sheets of Indian corporates for investment. Traditional private equity funds remain committed to investing in India across varying capital pools, and this complements the needs of Indian businesses at a time when banks have become cautious about corporate lending. A number of new sectors have been opened up for foreign investments, and are expected to draw corporate buyer interest as well, which is essential from an exit standpoint for private equity investors. In addition, there is the potential additional spend that could be caused by the 7th Pay Commission implementation and a good monsoon season, both of which are expected to bolster the economy further. While some of these factors may be short-term stimulants, they play an important role, and with the reforms process looking reasonably irreversible and India firmly on the path of fiscal consolidation, private equity investors are expected to continue to remain busy in the coming quarters. Sanjeev Krishan Leader, Private Equity and Transaction Services PwC India PwC MoneyTreeTM India Report – Q2 ’16 3 2. Analysis of PE investments PwC MoneyTreeTM India Report – Q2 ’16 Total private equity investments 7000 5,993 6000 5000 5,403 4,848 4,577 4,465 4,273 3,952 4000 6,601 Value of deals (in US$ Mn) 4,188 4,026 4,277 3,781 3,825 3,172 3000 2000 1000 2,578 2,397 2,581 2,729 2,314 2,164 2,198 2,565 2,006 2,114 2,165 2,128 1,948 1,853 1,790 1,749 1,384 1,196 814 1,384 1,299 865 755 2,456 3,158 2,882 2,348 1,571 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 0 101 89 108 99 118 96 140 179 167 109 135 86 81 50 72 103 100 93 128 106 135 138 152 135 147 133 143 122 120 127 125 111 156 135 136 146 211 186 203 184 186 147 The second quarter of 2016 has again given a strong push to Indian private equity (PE). Q2 ’16 has seen investments worth 4.3 billion USD in 147 deals, a 2% increase in value terms as compared to the previous quarter, despite deal volume decreasing by 21%. In Q1 ’16, investments worth 4.2 billion USD were made in 186 deals. As compared to Q2 ’15, the value of deals in this quarter has dropped by 29% and volume has declined by 21%. In Q2 ’15, PE investments stood at 6.0 billion USD in 186 deals. The average deal size for this quarter was 29.1 million USD. The information technology & IT-enabled services (IT & ITeS) sector continued its dominance in this quarter, despite a weak show by e-commerce investments. While the investment flow of 1.6 billion USD in 92 deals was 17% higher than Q1 of the year in value terms, there was an 11% drop in terms of volume. However, the value reflects a 14% drop as compared to the year-ago period. The banking, financial services & insurance sector (BFSI) again secured the second position, attracting 769 million USD—a 25% decline as compared to the previous quarter and a 14% surge as compared with the year-ago period. With just two deals, the energy sector attracted 730 million USD. This quarter has seen six buyouts worth 1.6 billion USD, and the PE appetite continued to be strong, with late-stage investments worth 1.2 billion USD in 25 deals. The drought in early-stage investments continued in this quarter, with just 183 million USD in 74 deals. Regionally, Bengaluru attracted a little more than 1.5 billion USD, while Mumbai saw investments of just 1.5 billion USD. Contributions from other regions were insignificant in this quarter. No. of deals Total equity investments in PEbacked companies Data provided by Venture Intelligence 4 Analysis of private equity investments Investments by industry Q2 ’15, Q1 ’16 and Q2 ’16 The dominance of the IT & ITeS sector continued in the second quarter of the year, despite a weakness in e-commerce related deals. The sector attracted 1.6 billion USD in 92 deals, which is 17% higher than the 1.4 billion USD in 103 deals it attracted in the previous quarter, but 14% lower than the 1.9 billion USD in 106 deals it received in Q2 ’15. “The IT&ITeS sector continued to receive the highest level of funding among all sector this quarter. Deal making displayed an expected dip after the frenzy of deals in late 2015 and, measured against the second quarter of last year, both values and volumes dropped. Investments in the e-commerce segment have also declined and there is a slowdown in the investment scenario across the start-up ecosystem. Going forward, while some investors may have a reduced appetite, newer investors will continue to invest in this segment for brighter ideas and teams. With consolidation starting to happen in the e-commerce segment and ongoing corrections around valuations, the focus on profitability will intensify in the coming quarters.” Sandeep Ladda Leader, Technology PwC India “As compared to the same period of last year, the investment in BFSI has grown in the second quarter of 2016, but given the activity in the market, we were expecting more deals to close. So, it would seem that macroeconomic and political factors, including Brexit, the US elections and slow growth in major economies, are impacting the overall deals market. Since the financial sector is one of the first sectors to be impacted by the external environment, slower deal closing is reflective of market sentiments.” Bharti Gupta Ramola Leader, Financial Services PwC India PwC MoneyTreeTM India Report – Q2 ’16 “Power generation platforms—both conventional and renewable—are attracting considerable interest from long-term investors and funds. A common theme is to deploy these platforms for takeover of partly developed and distressed assets, with a strong technical partner in tow to improve the commercial viability of these projects.” Kameswara Rao Leader, Energy PwC India 5 Analysis of private equity investments The manufacturing sector also witnessed a good deal flow in this quarter, with nine deals worth 544 million USD compared to the 178 million USD in the previous quarter and 355 million USD in five deals in Q2’15. Investments by industry Information technology (IT) & IT-enabled services (ITeS) 1,396 Energy 230 Telecom 10 730 83 677 BFSI 1,029 769 Manufacturing 178 355 544 Healthcare & life sciences 816 454 233 32 25 Food & beverages 1,899 1,631 1,565 Q2 2015 Q1 2016 137 81 25 22 2 119 19 Agri-business Engineering & construction Q2 2016 Fast-moving consumer goods (FMCG) Media & entertainment 1 65 21 418 Others 701 193 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Data provided by Venture Intelligence Note: Others include other services, hotels & resorts, sports & fitness, agribusiness and retail. PwC MoneyTreeTM India Report – Q2 ’16 6 Analysis of private equity investments Investments by stage of development Q2 ’15, Q1 ’16 and Q2 ’16 Buyouts led the PE investment inflow in the second quarter of the year with 1.6 billion USD in six deals, followed by late-stage investors with 1.2 billion USD in 25 deals. The growth stage attracted 793 million USD in 31 deals, whereas PIPE deals saw 527 million investment in 11 deals. Early-stage investments sank further to 183 million USD in 74 deals. Investments by stage development 356 Early 230 183 1,125 1,089 Growth 793 1,251 Late 1,544 1172 Q2 2015 Pre-IPO Q1 2016 Q2 2016 963 PIPE 338 527 2,248 Buyout 946 1603 50 40 Other Note: Definitions for the stage of development categories can be found in the ‘definitions’ section of this report. 0 500 1,000 1,500 2,000 2,500 Data provided by Venture Intelligence Growth stage in the above graph includes both growth and growth-PE stages. PwC MoneyTreeTM India Report – Q2 ’16 7 Analysis of private equity investments Investments by region Q2 ’15, Q1 ’16 and Q2 ’16 Interestingly, in this quarter, except Bengaluru and Mumbai, none of the other regions in the country attracted many PE investors. Bengaluru led with 1.538 million USD in 44 deals, followed by Mumbai with 1,500 million USD investments in 34 deals. Hyderabad received investments worth 370 million USD, followed by Chennai (367 million USD) and BCR (287 million USD). Investments by region 222 Bangalore 1,205 1,538 2,279 Mumbai 1,085 1,500 1,016 NCR 869 287 Q2 2015 Q1 2016 83 Hyderabad 320 370 Q2 2016 519 Chennai 55 367 1,873 Others 654 215 0 Note: NCR includes Delhi, Gurgaon and Noida. PwC MoneyTreeTM India Report – Q2 ’16 500 1,000 1,500 2,000 2,500 Data provided by Venture Intelligence 9 Analysis of private equity investments Top 20 PE deals Q2 ’16 The top 20 deals comprised 82% of the total deal value in Q2 ’16. The top five deals together accounted for 58% of the total deal value. The average deal value for this quarter was 29.1 million USD. Top 20 PE deals in Q2 2016 Company Industry Investors Amount (US$ Mn) Mphasis IT & ITeS Blackstone 1,100 Resurgent Power Energy CDPQ, SGRF, KIA 500 ICICI Home Finance BFSI TPG Capital 331 Sanmar Group Manufacturing Fairbridge Capital 300 Greenko Group Energy GIC, ADIA 230 Shriram Transport Finance BFSI IFC 150 Fractal Analytics IT & ITeS Khazanah 100 DFJ India Portfolio BFSI Newquest 100 Eicher Motors Manufacturing Cartica Capital 90 Future Supply Chain Shipping & logistics SSG Capital 88 Glenmark Pharmaceuticals Healthcare & life sciences IFC 75 Apollo Health & Lifestyle Healthcare & life sciences IFC 68 KKR 55 Classic Stripes - Promoter Holding Co Manufacturing DFM Foods Food & beverages WestBridge 52 Janalakshmi Financial Services BFSI IFC 50 Bangalore International Airport Travel & transport Fairbridge Capital 49 Vectra Networks IT & ITeS Wipro Ventures 44 Repco Home Finance BFSI IFC 40 Sanghi Industries Manufacturing Piramal Enterprises 39 KLT Automotive and Tubular Products Manufacturing KKR 35 Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 10 3. Analysis of PE exits Total PE exits Total PE exits PE exits in the second quarter of 2016 were among the lowest in recent history, with 1.2 billion USD in 40 deals. This is a 54% drop as compared to the previous quarter (2.6 billion USD in 39 deals) and a 70% drop from Q2 ’15 (4.0 billion USD in 71 deals). 4,500 With five exit deals worth 465 million USD, the BFSI sector has emerged at the top, followed by telecom with 206 million in one deal. IT saw exits worth 173 million USD in 14 deals. 3,000 There were four PE-backed IPOs with a total IPO value of 641 million USD. 3,500 3,079 2,560 2,500 1,913 2,000 1,514 1,500 948 1,000 500 801 1,227 973 948 706 554 607 574 669 789 210 308 268 795 1,7461,666 1,331 1,289 1,184 1,216 1,238 1,080 1,005 604 277 1,324 1,937 1,597 1,476 1,122 780 370 431 403 448 470 0 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 The public market has become the most preferred route for exits this quarter, with a total exit value of 713 million USD in 17 deals. Strategic sales followed, with a total exit value of 216 million USD in 16 deals and secondaries worth 214 million USD in five deals. 3,976 4,000 21 18 23 32 35 39 38 33 34 15 21 11 17 42 32 31 48 37 44 61 34 33 31 31 46 35 34 37 37 41 22 34 27 61 49 54 68 71 51 59 39 40 No. of deals Value of deals (in US$ Mn) Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 11 Analysis of PE exits Exits by industry Q2 ’15, Q1 ’16 and Q2 ’16 BFSI tops the exit chart this quarter with three of the top five. This includes the exit of a group of PEs from Equitas Holding, AU Financiers and Ujjivan. The total exit value of the BFSI sector was 465 million USD in five deals, which is four times higher than that of the previous quarter (110 million USD in three deals) and just a 7% drop from Q2 ’15 (297 million USD in nine deals). The telecom sector saw a single exit by Providence from Idea Cellular (worth 206 million USD), which made it the second largest sector for exits. In the previous quarter, the sector saw a single exit worth 60 million USD. In Q2 ’15, the sector saw two exits worth 271 million USD. The IT sector saw exits worth 173 million USD in 14 deals, which is a 58% drop as compared to the previous quarter (412 million USD in 12 deals) and a 91% drop as compared to the year-ago period (1.9 billion in 15 deals). Exits by industry 271 Telecom 60 206 497 BFSI 110 465 1,944 IT & ITeS 412 173 381 Manufacturing Q2 2015 1,273 Q1 2016 30 Q2 2016 12 Energy 224 5 338 345 Healthcare & life sciences 84 532 Others 136 221 0 500 1,000 1,500 2,000 2,500 Data provided by Venture Intelligence Note: Others include shipping & logistics, other services, retail, food & beverages and hotels & resorts. PwC MoneyTreeTM India Report – Q2 ’16 12 Analysis of PE exits Exits by type Q2 ’15, Q1 ’16 and Q2 ’16 With four IPOs, the public market has become the best exit route for PE investors in this quarter, with a total exit value of 713 million USD in 17 deals. In Q1’15, public market deals were worth 480 million USD in 12 deals, while in Q2’15, the figures were 1.4 billion USD in 47 deals. Exits by type 417 Buyback 188 40 Strategic sales saw exits worth 216 million USD in 16 deals, while secondary sales saw five deals worth 214 million USD. Two investors made exits worth 40 million USD via the buy-back route. 1,375 Public market sale 480 713 Q2 2015 Q1 2016 580 Secondary sale Q2 2016 639 214 1,604 Strategic sale 1,253 216 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 13 Analysis of PE exits Top five PE exits Q2 ’16 The top five exits comprised 58% of the total exit value in Q2 ’16. Top 5 PE exits in Q2 2016 Company Industry Investors Equitas Holdings BFSI IFC, Sequoia Capital India, CLSA Capital, FMO, Helion Ventures, Aquarius, Aavishkaar Goodwelll, Lok Capital, India Finacial Inclusion Fund, MicroVentures, Creation Investments 217 Idea Cellular Telecom Providence 206 AU Financiers BFSI Warburg Pincus, IFC, ChrysCapital, Motilal 112 Ujjivan Financial Services BFSI IFC, FMO, Units, Wolfensohn & Co., Lok 79 Carat Lane.com IT & ITeS Tiger Global 75 Deal amount (US$ Mn) Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 14 4. Active PE firms World Bank’s PE arm, IFC, and the home-grown Blume Ventures have entered into 11 deals each in this quarter. The most active PE investors in Q1 2016 are listed below. Q2 2016 Investors No. of deals* Blume Ventures 11 IFC 11 Sequoia Capital India 7 Accel India 6 Kalaari Capital 6 Beenos Partners 4 Omidyar Network 4 Ratan Tata 4 SAIF 4 IDG Ventures India 3 Katabole Technology Ventures 3 KKR 3 Matrix Partners India 3 Data provided by Venture Intelligence * Number of deals includes both single and coinvestments by PE firms. Cases where two or more firms have invested in a single deal are accounted for as one deal for each firm. PwC MoneyTreeTM India Report – Q2 ’16 15 5. Sector focus: IT & ITeS Mergers and acquisitions (M&As) in the technology sector have boomed over the course of the last few months. From megamergers to mid-market and smallscale transactions, the resurgence has been considerable. Deal activity in the global technology space has accelerated with recent announcements of Softbank acquiring ARM Holdings for US$32 billion, Uber China’s merger with Didi Chuxing, Verizon’s acquisition of Yahoo! for 4.83 billion USD, and Walmart’s acquisition of the e-commerce company Jet for 3.3 billion USD. These deals are expected to change the landscape of their specific industries—Uber exited from China with a hefty payout, and the competition is now left in an uncertain position; and Verizon, with both Yahoo! and AOL, could be a major player in digital advertising. Close to home, the technology industry, particularly e-commerce, has seen several M&As in the past quarter—Myntra’s acquisition of Jabong, Quikr’s acquisition of Hiree to expand QuikrJobs, 1mg’s acquisition of diagnostics marketplace Medd, and the merger of TinyOwl and Roadrunnr were some of the marquee deals. The e-commerce industry is poised for consolidation and a series of M&As this year are likely as companies as well as investors focus on sustainable growth and profitability. Already, larger players in several e-commerce segments have started snapping up competitors to strengthen their position (e.g., OYO Rooms’ acquisition of Zo Rooms). Recurring trends of transformation, consolidation and investments in emerging technologies continue to demonstrate the rapid evolution within the technology industry, which is also seeing increasing interest in digital assets from non-digital buyers, as seen in the cases of Future Group’s acquisition of Fabfurnish and Titan buying a majority stake in CaratLane. Going forward, we expect a gradual increase in deal activity as the year progresses. With increasing downward pressure on valuations, more assets will come to market, enticing recently inactive serial technology acquirers to start shopping again. Non-digital buyers are likely to add to deal volumes, although perhaps not proportionately to values, and are likely to focus on innovative technologies with the aim of making their business models more robust. Sandeep Ladda Leader, Technology PwC India PwC MoneyTreeTM India Report – Q2 ’16 16 Sector focus: IT & ITeS Interestingly, early-stage investing has seen a further drop in this quarter, with 164 million USD from 65 deals. 3,769 3,500 3,000 2,635 2,423 2,500 2,000 1,568 1,899 1,631 1,500 1,000 850 500 366 217 0 151 555 422 307 233 353 397 165 99 65 273 106 311 111 148 1,396 988 985 791 625 647 No. of deals The average deal size has surged to 17.7 million USD from 13.6 million USD in the last quarter. Also, average early-stage investment surged to 2.5 million USD. 4,000 481 515 347 303 443 312 648 1,072 1,094 772 181 150 35 21 34 35 35 32 33 27 47 26 24 16 21 21 28 16 36 24 40 47 43 43 47 49 60 40 44 43 48 48 70 61 78 79 114 106 119 109 103 92 This time, buyouts clearly earned the top spot in terms of stage of investing, with the single Mphasis deal worth 1.1 billion USD. Growth stage attracted 180 million USD in 17 deals. Value of PE investments in IT & ITeS sector (in US$ Mn) Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 With Blackstone’s 1.1-billion USD Mphasis deal, technology continued its dominance as the most attractive sector, with a total investment of 1.6 billion USD in 92 deals. This is 17% higher than the previous quarter, but a drop of 14% as compared to the year-ago period. In Q1 ’16, there were 103 deals worth 1.4 billion USD, while Q2 ’15 saw 106 deals worth 1.9 billion USD. There were no big ecommerce deals in this quarter. 28 18 Total PE investments Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 17 Sector focus: IT & ITeS A comparison between the quarter-on-quarter growth rates of the IT & ITeS PE investments against the total PE investments during the last decade shows that funding for this sector was higher than the total PE funding in most quarters. The second quarter of 2016 was no different, with total PE investments seeing a 2% growth and tech investment surging 17%. Value of PE investments in IT & ITeS sector 800% IT & ITeS investment growth Total investment growth 700% 600% 500% 400% 300% 200% 100% 0% -100% Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 -200% PwC MoneyTreeTM India Report – Q2 ’16 18 Sector focus: IT & ITeS Investments by stage of development Q2 ’15, Q1 ’16 and Q2 ’16 On the back of the 1.1-billion USD buyout of the BPO firm Mphasis by Blackstone, buyout deals have topped the stage of investments in this quarter. There were no buyout deals in the previous quarter, while a single deal of 440 million USD was recorded in the year-ago period. The growth stage has seen 17 deals worth 180 million USD, a 72% drop as compared to Q1 ’16 (651 million USD in 19 deals) and a 73% drop from Q2 ’15 (664 million USD from 20 deals). Similarly, late-stage deals saw a huge decline. This quarter has seen seven deals worth 158 million USD, while the previous quarter saw a similar number of deals that brought in investments worth 555 million USD. In the year-ago period, it was 529 million USD from 12 deals. Early-stage investments dropped by 5%, from 173 million USD in Q1 ’16 to 164 million USD in Q2 ’16. Further, PIPE deals saw 29 million USD in two deals. IT & ITeS investments by stage of development 440 Buyout 1,100 261 Early 173 164 664 651 Growth Q2 2015 Q1 2016 Q2 2016 180 529 555 Late 158 6 18 29 PIPE 0 200 400 600 800 1,000 1,200 Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 19 Sector focus: IT & ITeS Investments by region Q2 ’15, Q1 ’16 and Q2 ’16 Regionally, Bengaluru has made a comeback in Q2 ’16. It became the favourite destination for technology investments, attracting 75% of the total invested money—that is, 1.2 billion USD across 31 deals. Mumbai lagged behind in the second slot with 179 million USD in 19 deals. IT & ITeS investments by region 146 Bangalore 434 1,220 1,061 Mumbai 409 179 474 NCR Q2 2015 376 Q1 2016 105 Q2 2016 128 Chennai 8 15 90 Others 169 112 0 200 400 600 800 1,000 1,200 1,400 Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 20 Sector focus: IT & ITeS Investments by subsector Q2 ’15, Q1 ’16 and Q2 ’16 IT services has become the top subsector with the Mphasis deal worth 1.1 billion USD. Online services, a distant second, attracted just 173 million USD in 37 deals. IT & ITeS investments by subsector 750 Online services 910 173 10 BPO 87 100 522 Mobile VAS 45 104 Q2 2015 Q1 2016 137 173 Enterprise software Q2 2016 50 445 IT services 31 1,100 35 Others 151 103 0 200 400 600 800 1,000 1,200 Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 21 Sector focus: IT & ITeS PE exits in the sector Q2 ’15, Q1 ’16 and Q2 ’16 As compared to the previous quarter, there was a 58% drop in exits in the IT & ITeS sector in Q2 ’16. The sector saw exits worth 173 million USD in 14 deals, as compared to 412 million USD in 12 deals in Q1 ’16. Strategic sales saw the highest number of exits—worth 161 million USD in 11 deals. Total IT & ITeS exits 2,500 1,944 2,000 1,719 1,500 1,056 1,000 679 612 393 379 316 500 176 93 77 22 26 29 58 81 287 261 105 78 67 19 12 32 12 25 225 48 615 448 258 185 340 129 225 194 96 156 154 106 181 412 98 10 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 0 56 162 685 519 498 8 4 3 12 5 6 8 8 7 6 11 12 9 16 7 8 9 5 4 3 5 4 8 8 14 11 4 13 9 8 4 9 11 9 8 9 5 10 9 7 9 14 6 15 18 15 9 14 12 No. of deals Value of deals (in US$ Mn) Data provided by Venture Intelligence PwC MoneyTreeTM India Report – Q2 ’16 22 Definitions Stages of development Early stage – This refers to the first or second round of institutional investments in companies that adhere to the following: Less than five years old Not part of a larger business group Investment is less than 20 million USD Growth stage – This refers to investments of less than 20 million USD. Also, investments meeting the following criteria are considered to be in the growth stage: Third or fourth round funding of institutional investments First or second round of institutional investments in companies that are more than 5 years old and less than 10 years old or spinouts from larger businesses Growth-stage PE – This includes the following: First or second round of investments worth 20 million USD or more PwC MoneyTreeTM India Report – Q2 ’16 Third or fourth round funding in companies that are more than 5 years old and less than 10 years old, or subsidiaries or spin-outs from larger businesses Fifth or sixth round of institutional investments Late stage – This comprises the following: Investment in companies that are a decade old Seventh or later round of institutional investments PIPEs – The following constitute PIPEs: PE investments in publicly listed companies via preferential allotments or private placements Acquisition of shares by PE firms via the secondary market Buyout – This is an acquisition of controlling stake via purchase of stakes of existing shareholders. Buyout (large) – This includes buyout deals of 100 million USD or more in value. Other – This includes PE investments in special purpose vehicle (SPV) or project-level investments. Types of PE exits Buy-back – This includes the purchase of PE or VC investors’ equity stakes by either the investee company or its founders or promoters. Strategic sale – This includes the sale of PE or VC investors’ equity stakes (or the entire investee company itself) to a third-party company (which is typically a larger company in the same sector). Secondary sale – Any purchase of PE or VC investors’ equity stakes by another PE or VC investors constitutes secondary sale. Public market sale – This includes the sale of PE or VC investors’ equity stakes in a listed company through the public market. Initial public offering (IPO) – This includes the sale of PE or VC investors’ equity stake in an unlisted company through its first public offering of stock. 23 www.pwc.com/globalmoneytree www.pwc.in Contacts About PwC’s Technology Institute Sandeep Ladda Leader, Technology PwC India [email protected] The Technology Institute is PwC’s global research network that studies the business of technology and the technology of business with the purpose of creating thought leadership that offers both fact-based analysis and experience-based perspectives. Technology Institute insights and viewpoints originate from active collaboration between our professionals across the globe and their first-hand experiences working in and with the technology industry. For more information, please contact Raman Chitkara, Global Technology Industry Leader, at Sanjeev Krishan Leader, Private Equity PwC India [email protected] This report was researched and written by the following: Pradyumna Sahu Director, Technology PwC India [email protected] Sibi Sathyan Knowledge Manager, Private Equity PwC India [email protected] About PwC At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. www.pwc.com PricewaterhouseCoopers and Venture Intelligence have taken responsible steps to ensure that the information contained in the MoneyTreeTM report has been obtained from reliable sources. However, neither of the parties can warrant the ultimate validity of the data obtained. Results are updated periodically. Therefore, all data is subject to change at any time. Before making any decision or taking any action, you should consult a competent professional adviser. ©2016 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.