Logistics Sector Attracts Investor Interest

PE investors rushed to pick up equity in firms in India last year as they sought to increase exposure to consumer technology, healthcare sectors Mumbai: Global private equity (PE) investors, including many who had shunned India in the past, rushed to pick up equity in private and public firms in the country last year as they sought to increase exposure to the fast-growing consumer technology and healthcare sectors. According to Bain and Co.s India Private Equity Report 2015, shared exclusively with Mint, the number of funds investing in India rose by 30% in 2014 compared with a year ago. Some 440 funds invested in India last year. Close to 50% of these were doing so for the first time or after a long gap. Investors who invested after a gap of two years have also been included in this category. There are quite a few new investors who are investing in India including some who were dormant for the past few years. A new class of investors has now come to India, particularly on the early stage and growth side, said Arpan Sheth, the head of Bains India PE practice and lead author of the report. Some of the new funds that invested in India last year include DST Advisors, Greenoaks Ventures, Steadview Capital, Tybourne Capital, Brookfield Asset Management Inc., Saama Capital India Advisors Llp, Baillie Gifford and Co., Myriad Asset Management, PSP Investments and Canada Pension Plan Investment Board. Many of these investors participated in some of the largest transactions last year infusing money into Flipkart, Snapdeal, Unitech Corporate Parks and Kotak Mahindra Bank Ltd, among others. General partners (GPs) were always keen on investing in India but due to the poor investment environment very few people invested between 2009 and 2013. After the change in government at the centre, limited partners have become bullish about India and they are allocating capital to certain GPs, said Prakash Nene, managing director at Multiples Alternate Asset Management Pvt. Ltd. Multiples is currently on the road to raise $600 million from global and domestic investors. Limited partners are investors who commit capital to a PE fund. GPs are the managing partners in the fund. Other firms which have raised capital over the past six months and have allocated capital for India include Baring Private Equity Asia, I Squared Capital, Caryle Group LP. The number and value of deals also increased in 2014. According to the report, PE and venture capital (VC) deals worth $15.2 billion were closed last year, an increase of 28%. This was the highest in the past five years and came close to the 2007 peak of $17.1 billion. Deal volumes rose 14%, with early- and growth-stage deals accounting for 80% of all deals last year. To be sure, deal activity surged across the Asia-Pacific region, except in Japan. The value of deals concluded (excluding real estate, infrastructure and deals less than $10 million) in the Asia-Pacific, excluding Japan, rose 63%. Spurred by a number of billion-dollar mega deals, Greater China saw a 180% year-on-year rise in deals. The highest number of investments came into the consumer technology (CT), real estate and banking, financial services and insurance (BFSI) sectors. The Bain report noted that deals in CT firms led in both deal value and volume, accounting for 31% of overall PE deal value and 35% of deal volume. Investments in the sector rose from $1.2 billion in 2013 to $4.7 billion in 2014, as the number of deals grew by 18% to 280. The burgeoning activity in the CT space led to a surge in valuations of these assets. Most fund managers agreed that valuations were high, but still expected a 10-25% increase in valuations in 2015. Sheth said investors were now keenly evaluating firms which act as enablers for CT firms, such as those that provide logistics and other services. These enablers are very important for the ecosystem and the growth of e-commerce companies. From an investor perspective, the enabler companies are a way to play the market and not take a bet on a particular segment in e-commerce or any one particular company, he said. 

A forklift driver prepares to stack a container at a port in Kolkata January 10, 2014. REUTERS/Rupak De Chowdhuri/Files