www.pwc.com/globalmoneytree www.pwc.in PricewaterhouseCoopers India Pvt Ltd MoneyTree TM India Report Technology Institute This special report provides summary results of Q1 16, Q4 16, and Q1 17.
Table of contents 1. Overview 3 2. Analysis of PE investments 4 Total equity investments in PE-backed companies 4 Investments by industry 5 Investments by stage of development 7 Investments by region 8 Top 20 PE deals 3. Analysis of PE exits 10 Total PE exits 10 Exits by industry 11 Exits by type 12 Top five PE exits 13 4. Active PE firms 14 5. Sector focus IT & ITeS sector 15 Total PE investments 16 Investments by stage of development 17 Investments by region 18 Investments by subsector 1 PE exits in the sector 20 Definitions 21 PwC MoneyTree India 2
1. Overview 2017 opened on a strong note, with the first quarter of the year recording private equity (PE) investments worth around 6.8 billion USD across 130 deals. Despite a decline in deal volume, investment value reported a 31% increase over the previous quarter and a 61% increase over the same period last year, indicating an optimism in investor sentiments towards India s macros. The Information Technology (IT) & IT-enabled services (IT & ITeS) sector witnessed the highest investment activity, with around 3.3 billion USD invested across 66 deals; this accounted for almost 50% of the total investment value and volume in the first quarter of 2017. The Telecom sector recorded over 1 billion USD worth of investments across two deals, which included KKR and CPPIB s nearly 1-billion USD investment in Bharti Infratel. This was closely followed by the Banking, Financial services & Insurance (BFSI) sector, with a little under 1 billion USD invested across 1 deals. Healthcare & Life sciences reported investments worth 544 million USD across 10 deals more than double the investment value as compared to the previous quarter. Although the Energy sector retained its position among the top sectors for PE investments in this quarter, it witnessed a 61% decline in deal value and a 70% decline in deal volume. The Logistics sector witnessed a significant increase in activity over the same period last year, with 252 million USD invested across seven deals. Late-stage investments accounted for almost 44% of the investment value this quarter. Early-stage investments declined by around 30% in terms of value as compared to the previous quarter, while the value of PIPE deals increased almost threefold over the last quarter of 2016 to around 1.6 billion USD. From an exit standpoint, this quarter recorded the second highest activity in the last decade, with around 3.2 billion USD across 53 exits, a 72% increase in value over the previous quarter and a 37% increase in value over the same period last year. Secondary sales accounted for around 41% of the exit value in this quarter, indicating a probable increase in secondary opportunities ahead. With valuations at an all-time high, deal activity in the coming quarters is likely to continue at a watchful pace, with investors looking for quality deals. The government continues to improve economic resilience with the proposed dismantling of the Foreign Investment Promotion Board (FIPB) and the introduction of the Goods and Services Tax (GST), which should drive investor confidence and positivity going forward. Sanjeev Krishan Leader, Private Equity and Transaction Services PwC India PwC MoneyTree India 3
2. Analysis of PE investments Total equity investments in PE-backed companies The new year has had a very strong opening quarter in terms of private equity (PE) investments. Q1 17 recorded total investments worth around 6.8 billion USD in 130 deals. This is a new high for PE investments over the last decade second only to the approximately 6. billion USD attracted in Q3 15. Compared to the year-ago period (which saw investments worth around 4.2 billion USD in 214 deals), there was a 61% increase in value, but a 3% decrease in volume. Further, as compared to Q4 16 (when investments stood at around 5.2 billion USD in 16 deals), the value of deals in this quarter has grown by 31%, despite a volume decrease of 34%. The average deal size for Q1 17 was around 52.3 million USD. The Information technology & IT-enabled services (IT & ITeS) sector reclaimed the top spot this quarter, largely on the strength of a 1.4 billion USD investment from Tencent and others in Flipkart. The sector witnessed a 318% jump in deal value despite a 40% decline in deal volume compared to the last quarter. Telecom slipped to the second position in Q1 17, with an investment flow of about 1 billion USD in two deals. This was a 38% decrease in deal value compared to Q4 16. Engineering & Construction, Media & Entertainment and Healthcare & Life sciences all received a significant boost in Q1 17, while PE investment in the Manufacturing and Energy sectors faced a marked dip in the first quarter. Late-stage investments were the most popular route for PE investors in this quarter with a total of 1 deals worth approximately 3 billion USD. PIPE deals, which came second, witnessed a massive 243% increase in value in Q1 17, with investments worth around 1.6 billion USD in 13 deals. Buyouts, which were the leading stage of development in the last quarter, faced a significant drop from around 2.1 billion USD in Q4 17 to 51 million USD in this quarter. Regionally, National Capital Region (NCR) raced ahead of Mumbai with total investments worth around 2.4 billion USD. With a staggering 70% increase in PE investment value, Bengaluru climbed to the second position, pushing Mumbai down to the third spot. Total private equity investments (in US$ mn) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 No. of deals 4,577 5,403 2,164 2,578 2,006 2,128 1,70 1,384 101 8 108 118 6 140 17 167 10 135 86 81 50 72 103 100 3 128 106 135 138 152 135 147 133 143 122 120 127 125 111 156 135 136 146 225 187 241 1 214 163 144 16 130 Value of deals (in US$ Mn) 6,87 6,77 4,848 4,667 4,460 4,273 3,825 3,52 4,026 4,215 5,208 4,315 2,72 3,172 4,465 3,51 2,581 2,37 3,400 2,314 2,348 2,114 2,882 2,565 1,74 2,456 2,18 1,48 2,165 1,853 1,16 814 1,571 1,3841,2 755 865 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 200 Q2 200 Q3 200 Q4 200 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 Q2 2016 Q3 2016 PwC MoneyTree India 4
Analysis of PE investments Investments by industry Q1 16, Q4 16 and Q1 17 With 66 deals worth approximately 3.3 billion USD, the IT & ITeS sector overshadowed the other sectors in Q1 17. Its dominance was primarily the result of two large deals an investment of 1.4 billion USD by Tencent and others in Flipkart and CPPIB s 720-million USD investment in GlobalLogic. Clearly, the sector has bounced back after the brief slump it experienced in the last quarter. Telecom, the top sector in Q4 16, ranked a distant second in this quarter, with investments worth about 1 billion USD in two deals. Although this was a 38% drop in investment value compared to Q4 16, if we look at the year-ago period, the sector may safely be considered to be continuing to enjoy its healthy PE investment streak. Engineering & Construction displayed a notable 467% spike in investments compared to Q4 16, with one deal worth 52 million USD. Media & Entertainment (222%) and Healthcare & Life sciences (137%) both witnessed significant growth in PE investment value in this quarter, closing with 126 million USD in three deals and 544 million USD in ten deals, respectively. Note: Others include Other services, Hotels & resorts, Sports & fitness, Agribusiness and Retail. Investments by industry (in US$ mn) Information technology (IT) & IT-enabled services (ITeS) Energy Telecom Banking, Financial services & Insurance (BFSI) Manufacturing Healthcare & Life sciences Food & Beverages Agri-business Engg. & Construction Fast-moving consumer goods (FMCG) Media & Entertainment Others 0 500 1,000 1,500 2,000 2,500 3,000 3,500 10 230 221 571 782 1,032 48 35 6 187 424 31 462 22 544 24 13 17 25 26 30 114 52 0 71 45 21 3 126 785 437 434 1,40 1,673 3,270 PwC MoneyTree India 5
Analysis of PE investments In terms of deal activity, the first quarter saw the IT & ITeS space continue to account for a large share of overall deal value despite a drop in volume. Although the quarter witnessed large investments in Indian ecommerce players such as Flipkart, Ola and Paytm, for the most part, the segment saw funds drying up due to the rationalisation of investments and start-up valuations. However, the rise of India-focused technology venture funds, the government s structural reforms such as the Goods and Services Tax (GST) and the recently announced digital measures in Budget 2017 are likely to accelerate deal activity in the segment. Sandeep Ladda Leader, Technology PwC India PwC MoneyTree India 6
Analysis of PE investments Investments by stage of development Q1 16, Q4 16 and Q1 17 In the first quarter of 2017, late-stage investments claimed the top spot in terms of stage of development, with an inflow of approximately 3 billion USD across 1 deals. This was a 145% increase in deal value compared to Q4 16. The upward trend persists for PIPE deals with a 243% rise from 465 million USD across 12 deals in Q4 16 to nearly 1.6 billion USD in 13 deals in the current quarter. Growth-stage investments rounded off the top three, with 26 deals worth around 1 billion USD. Buyouts, which were the top source of PE investment in the previous quarter, slipped to the fourth position in this quarter, seeing a 72% decline in deal value. Investments by stage development (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 257 Early 311 221 1,038 Growth 873 1,07 1,437 Late 1,211 2,64 Pre-IPO 2 0 0 PIPE 325 465 1,55 Note: Definitions for the stage of development categories can be found in the definitions section of this report. Growth stage in the above graph includes both growth and growth-pe stages. Buyout 51 300 Other 205 348 856 2,143 PwC MoneyTree India 7
Analysis of PE investments Investments by region Q1 16, Q4 16 and Q1 17 In terms of region, NCR and Bengaluru surged ahead of Mumbai in the first quarter of the new year. With investments worth around 2.4 billion USD across 33 deals, the capital region witnessed a 120% jump in PE investment value compared to the last quarter. Buoyed by investments worth almost 2 billion USD in 32 deals, Bengaluru rose to the second position. Faced with a 40% decline in PE investment value, Mumbai came in third, closing the quarter with 32 deals worth around 1.5 billion USD. Investments by region (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 1,250 Bengaluru 223 1,80 1,032 Mumbai 2,602 1,548 NCR 880 1,01 2,405 Hyderabad 75 160 320 Chennai 80 5 280 Note: NCR includes Delhi, Gurgaon and Noida. Others 652 645 37 PwC MoneyTree India 8
Analysis of PE investments Top 20 PE deals Q1 17 The top 20 deals comprised 83% of the total deal value in Q1 17. The top five deals together accounted for nearly 55% of the total deal value. The average deal size for this quarter was around 52.3 million USD. Top 20 PE deals in Company Industry Investors Amount (US$ mn) Flipkart IT & ITeS Tencent, Others 1,400 Bharti Infratel Telecom KKR, CPPIB 52 GlobalLogic IT & ITeS CPPIB 720 Kotak Mahindra Bank BFSI CDPQ, CPPIB 338 Ola IT & ITeS SoftBank Corp, Others 330 Manipal Health Enterprises Healthcare & Life sciences Temasek 215 Paytm E-Commerce IT & ITeS SAIF, Alibaba 200 Condis Healthcare Healthcare & Life sciences India Value Fund 200 ReNew Wind Power Energy JERA 200 Orbit Tours and Travels IT & ITeS Emerging India 180 PVR Cinemas Media & Entertainment Warburg Pincus 120 Spandana Sphoorty Financial BFSI Kedaara Capital, Ontario Teachers Pension 100 Home First Finance Company BFSI India Value Fund 100 Delhivery Shipping & Logistics Carlyle, Tiger Global 100 L&T Infrastructure Finance BFSI IFC 100 Resonance Eduventures Education KKR 7 Planetcast Media Services Telecom AION Capital 80 India Infoline BFSI Fairfax Holdings 76 Disha Microfin BFSI India Value Fund, TA Associates, LeapFrog, 75 Tata Opportunities Fund, Others Zinka Logistics IT & ITeS IFC, Accel India, Flipkart, Sands Capital, Others 70 PwC MoneyTree India
3. Analysis of PE exits Total PE exits Q1 17 In Q1 17, there was a 72% increase in the value of PE exits compared to the last quarter. In all, there were 53 deals worth 3.2 billion USD. In, the total exits were valued at 1.8 billion USD in 68 deals. Further, there was a 37% rise in value compared to the year-ago period (approximately 2.3 billion USD in 43 deals). IT & ITeS was the top sector in terms of PE exits in this quarter, with a total of nine exits worth around 1.1 billion USD. BFSI and Healthcare & Life sciences followed, with exits worth around 683 million USD in 11 deals and 47 million USD in 10 deals, respectively. The Manufacturing sector witnessed a decline (83%) in exit value this quarter. Gaining a slight edge over public market sales, secondary sales emerged as the most preferred exit route, with a total value of around 1.3 billion USD in eight deals. In all, 28 exits worth around 1.3 billion USD followed the public market sale route in Q1 17. Total PE exits (in US$ mn) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 No. of deals 0 554574 48 80166 607 1,514 48 73 78 706 604 308 370 210 268277 Value of deals (in US$ mn) 3,07 1,227 1,080 1,005780 75 21 18 23 32 35 3 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 4 54 73 73 55 6 43 4 71 68 53 431 1,324 403 1,476 1,57 1,122 1,13 448 1,216 470 1,28 1,238 3,77 1,78 1,820 1,331 2,478 2,317 1,774 1,333 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 200 Q2 200 Q3 200 Q4 200 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 Q2 2016 Q3 2016 3,16 1,843 PwC MoneyTree India 10
Analysis of PE exits Exits by industry Q1 16, Q4 16 and Q1 17 IT & ITeS led exits by industry, with nine deals worth about 1.1 billion USD. This was a more than fivefold increase in exit value compared to the last quarter (around 212 million USD in 11 deals) and includes the exit of Apax Partners from GlobalLogic and that of Reliance Venture, Saama Capital and Sapphire Ventures from One7 Communications the top two exits in this quarter. BFSI was the second largest sector for exits. In all, there were 11 exits worth around 683 million USD. This represents a 63% increase in value compared to the previous quarter, which saw exits worth about 41 million USD in 15 deals. Healthcare & Life sciences came in third with 10 exits worth around 47 million USD. This was a substantial increase compared to the previous quarter, when exits from this sector stood at 17 million USD in 10 deals. Although there were only two exits from the Telecom sector in Q1 17, they were of high value (compared to the last quarter), with Providence s exit from Idea Cellular being the fifth highest exit of the quarter. The Manufacturing sector reported a downward trend in exits in this quarter. Exits by industry (in US$ mn) 0 200 400 600 800 1000 1200 1400 60 Telecom 4 216 110 BFSI 41 683 427 IT & ITeS 212 1,04 1,263 Manufacturing 714 11 0 Energy 2 3 345 Healthcare & Life sciences 17 47 Note: Others include Shipping & Logistics, Other services, Retail, Food & Beverages and Hotels & Resorts. Others 112 270 522 PwC MoneyTree India 11
Analysis of PE exits Exits by type Q1 16, Q4 16 and Q1 17 Secondary sale was the preferred exit route for PE investors in this quarter, with a total exit value of around 1.3 billion USD in eight deals. In Q4 16, secondary sales deals were worth around 510 million USD in 10 deals, while in Q1 16, the figures were around 585 million USD in 12 deals. Public market sales saw exits worth about 1.3 billion USD in 28 deals, while strategic sales saw 15 deals worth 531 million USD. Two exits worth 0.8 million USD were made via the buyback route in this quarter. Exits by type (in US$ mn) 0 200 400 600 800 1,000 1,200 1,400 188 Buyback 52 1 278 Public market sale 70 585 1,251 Secondary sale 50 1,26 1,260 Strategic sale 307 531 PwC MoneyTree India 12
Analysis of PE exits Top five PE exits Q1 17 The top five exits comprised nearly 5o% of the total exit value in Q1 17. Top 5 PE exits in Company Industry Investor Deal amount (US$ mn) GlobalLogic IT & ITeS Apax Partners 720.0 One7 Communications IT & ITeS Reliance Venture, Saama Capital, Sapphire Ventures 250.0 Manipal Health Enterprises Healthcare & Life sciences India Value Fund 215.0 Condis Healthcare Healthcare & Life sciences OrbiMed, Ascent Capital 200.0 Idea Cellular Telecom Providence 13.2 PwC MoneyTree India 13
4. Active PE firms IDG Ventures India entered into eight deals in this quarter; Blume Ventures, Accel India and Sequoia Capital India followed with six deals each. The most active PE investors in Q1 17 are listed at right. * 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. investors No. of deals investors No. of deals IDG Ventures India 8 Pravega Ventures 2 Blume Ventures 6 Shunwei Capital 2 Accel India 6 Lok Capital 2 Sequoia Capital India 6 ADB 2 Kalaari Capital 5 Orios VP 2 Mayfield 4 SBICAPS Ventures 2 IFC 4 Google Capital 2 Nexus Venture Partners 4 Eight Roads Ventures 2 India Value Fund 3 Matrix Partners India 2 Endiya Partners 3 Axilor Ventures 2 Michael & Susan Dell Foundation 3 Paragon Partners 2 ChrysCapital 3 Aavishkaar 2 Village Capital 3 Fairfax Holdings 2 IvyCap Ventures 3 Kae Capital 2 Beenext 3 Tencent 2 TA Associates 3 SAIF 2 PremjiInvest 2 NYLIM Jacob Ballas Funds 2 Sistema Asia Fund 2 AdvantEdge Partners 2 Everstone 2 Pi Ventures 2 CPPIB 2 Ideaspring 2 Temasek 2 SIDBI VC 2 Villgro 2 SoftBank Corp 2 3ONE4 Capital 2 PwC MoneyTree India 14
5. Sector focus IT & ITeS sector In 2016, the Indian IT industry felt the impact of the global economic slowdown and political upheavals. Accordingly, corporates became more conservative in their decision making. 1 Interestingly, in FY17, these trends did not slow down investments in new technologies such as IoT, AI, automation, smart mobility, P2P payments and remote monitoring, thus paving the way for their entry into the mainstream digital economy. Indian IT companies were also seen to boost their automation credentials in the wake of customer demands for lower prices. This could soon lead to a natural change in hiring patterns, with unconventional roles likely to be more attractive for high-margin digital jobs. This quarter saw the government continue its big push to the digital economy. The industry welcomed a host of digital measures such as Digi Gaon, the Bharat Interface for Money (BHIM) app, the Payments Regulatory Board and AadhaarPay. Rationalisation of regulations and, in particular, labour laws is also expected to have a far-reaching effect on the ease of doing business. Budget 2017 also addressed one of the key concerns related to tax disputes abroad and foreign tax credit (FTC). Additionally, Make in India was given a significant boost in the Budget through increased allocation for electronics manufacturing under the Modified Special Incentive Package Scheme (M-SIPS) and Electronic Development Fund (EDF). To support investments and the scaling up of start-ups, the government recently changed provisions for carrying forward losses and extended the time period for eligibility for the three-year income tax exemption. However, amidst valuation markdowns and slow growth, profitability and sustainability remain the key focus areas for ecommerce players in India. As a result, consolidation is expected to continue as poorly performing players join forces with the larger ones to create synergies. 2016 saw a slowdown in funding for the ecommerce sector, leading to players moving away from heavy discounts to same-day delivery and providing better customer experiences. 1 The funding slowdown has shown some signs of improvement and the first quarter ended with a bang, with Flipkart announcing the Indian start-up ecosystem s largest funding round a massive 1.4 billion USD investment led by Tencent, ebay and Microsoft. Meanwhile, in the US, which is the single largest revenue source for the Indian IT industry, new immigration policies and visa reforms could create barriers to on-site deployment of Indian tech specialists. At a time when traditional outsourcing is under threat of commoditisation, IT players could see a further strain on their diminishing margins. To keep pace with the evolving trends, Indian IT companies are expected to adopt new on-demand business models and focus on strategic tuck-in digital acquisitions. Sandeep Ladda Leader, Technology PwC India 1 NASSCOM, The IT-BPM Sector in India: Strategic Review 2017, Feb 2017 PwC MoneyTree India 15
Sector focus IT & ITeS sector Total PE investments In Q1 17, PE investments in the IT & ITeS sector showed remarkable growth compared to both the previous quarter as well as the year-ago period. There were a total of 66 deals worth approximately 3.3 billion USD. In comparison, there were 110 deals worth around 782 million USD in Q4 16 and 122 deals worth around 1.4 billion USD in Q1 16. These numbers indicate a clear and substantial rise in the size of individual deals. Late-stage deals were the most preferred route for PE investments in the IT & ITeS sector in this quarter. In all, there were three deals worth around 2.1 billion USD. Despite a 131% increase in deal value compared to the previous quarter, growthstage investments slipped to the second position in Q1 17. A total of 12 deals worth 807 million USD were made through this channel. Finally, there was a slowdown in both early-stage deals and buyouts in Q1 17. In terms of region, Bengaluru acquired a major lead over the other cities. NCR and Mumbai also showed extremely positive growth, while Chennai faced a sizeable 86% dip in IT & ITeS investment compared to the previous quarter. Finally, in terms of subsector, Online services outshadowed the others, receiving almost 2 billion USD across 27 deals. The value of PE investments in BPOs, on the other hand, witnessed a significant decline from 166 million USD in Q4 16 to 64 million USD in this quarter. The average deal size this quarter was around 4.5 million USD compared to about 7.1 million USD in the last quarter. Value of PE Investments in IT & ITeS sector (in US$ mn) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 217 850 366 625 647 71 307 555353 422 165 65 37106 273 311 111 148 347 515 443 303312 151 233 Value of PE investments in IT & ITeS sector (in US$ mn) In Q1 17, funding growth for the IT & ITeS sector and overall PE investment moved in parallel. While tech investment rose, impressively, by around 318% compared to the last quarter, total PE funding enjoyed a 31% increase. 2,423 88 85 481 648 772 181150 2,635 1,2 1,83 1,568 3,846 1,247 1,645 1,40 1,255 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 200 Q2 200 Q3 200 Q4 200 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 Q2 2016 Q3 2016 782 3,270 PwC MoneyTree India 16
Sector focus IT & ITeS sector Investments by stage of development Q1 16, Q4 16 and Q1 17 Investments by stage of development (in US$ mn) 0 500 1,000 1,500 2,000 2,500 0 Late-stage deals were the preferred route for PE investments in the IT & ITeS sector in Q1 17. The quarter saw three deals worth around 2.1 billion USD through this mode. This represents a staggering increase compared to both the previous quarter and the year-ago period, when investments stood at 11 million USD in two deals and 486 million USD in six deals, respectively. Growth-stage deals, which followed, saw investments worth 807 million USD in 12 deals. In comparison, in the previous quarter, 22 deals worth 350 million USD were made through this route. While the value of PIPE deals doubled compared to the previous quarter (from 11 million USD to 22 million USD), early-stage deals and buyouts showed a decline. In value terms, the fall in value of early-stage deals in Q1 17 ranged between 30-40% compared to the previous quarter and the year-ago period. Buyout Early Growth Late 11 185 180 211 224 141 350 486 64 807 2,120 18 PIPE 11 22 PwC MoneyTree India 17
Sector focus IT & ITeS sector Investments by region Q1 16, Q4 16 and Q1 17 Bengaluru zipped past the other cities in the first quarter of the year. Its IT & ITeS sector amassed investments worth around 1.6 billion USD in 25 deals. This was a more than thirteen times increase in deal value compared to the previous quarter and an over three-and-a-half times increase compared to Q1 16. NCR and Mumbai finished second and third, with 57 million USD in 18 deals and 55 million USD in 11 deals, respectively. Investments by region (in US$ mn) 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 457 Bengaluru 122 1,61 448 Mumbai 11 55 NCR 205 378 57 Chennai 21 65 Others 104 0 271 PwC MoneyTree India 18
Sector focus IT & ITeS sector Investments by subsector Q1 16, Q4 16 and Q1 17 As in Q4 16, Online services was the clear frontrunner in this quarter as well, with 27 deals worth around 2 billion USD. This represented a nearly five times increase in deal value compared to the last quarter. Mobile VAS saw investments leap from 50 million USD in 13 deals in Q4 16 to 372 million USD in 13 deals in this quarter. Investments by subsector (in US$ mn) Online services Business process outsourcing (BPO) 0 500 1,000 1,500 2,000 2,500 87 166 64 405 1,111 1,68 Mobile VAS 55 50 372 Enterprise software 117 102 IT services 2 0 738 Others 28 44 26 PwC MoneyTree India 1
Sector focus IT & ITeS sector PE exits in the sector Q1 16, Q4 16 and Q1 17 In comparison with the previous quarter, there was a significant increase in exits in the IT & ITeS sector in Q1 17. The sector saw exits worth about 1.1 billion USD in nine deals compared to 212 million USD in eleven deals in the previous quarter. Secondary sales were the preferred exit route in Q1 17 with one deal worth 720 million USD. Total IT & ITeS exits 2500 2000 Value of deals (in US$ mn) 1,71 1,44 1500 1,056 1,04 1000 87 500 0 176 3 22 77 26 2 67 58 316 37 33 261 287 225 81 105 162 78 56 67 1 12 12 32 25 48 340 156 612 154 6 12 106 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 200 Q2 200 Q3 200 Q4 200 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 Q2 2016 Q3 2016 258 225 51 14 48 181 185 685 448 10 103 622 8 427 No. of deals 3 12 6 11 12 16 8 14 11 4 13 11 5 10 14 6 15 18 15 212 16 15 14 18 11 8 4 5 6 8 8 7 7 8 5 4 3 5 4 8 8 4 8 7 PwC MoneyTree India 20
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 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 Buyback: 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. PwC MoneyTree India 21
www.pwc.com/globalmoneytree www.pwc.in Contacts Sandeep Ladda Leader, Technology PwC India sandeep.ladda@in.pwc.com Sanjeev Krishan Leader, Private Equity PwC India sanjeev.krishan@in.pwc.com This report was researched and written by the following: Pradyumna Sahu Executive Director, Markets & Industries PwC India pradyumna.sahu@in.pwc.com Dion D Souza Manager, Markets & Industries PwC India dion.dsouza@in.pwc.com Suneet Mohan Knowledge Manager, Technology PwC India suneet.mohan@in.pwc.com About PwC s Technology Institute 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 raman.chitkara@us.pwc.com 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 223,000 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/in In India, PwC has offices in these cities: Ahmedabad, Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune. For more information about PwC India s service offerings, visit www.pwc.com/in This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. PwC refers to the PwC International network and/or one or more of its member firms, each of which is a separate, independent and distinct legal entity. Please see www.pwc.com/structure for further details. PricewaterhouseCoopers and Venture Intelligence have taken responsible steps to ensure that the information contained in the MoneyTree TM 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. 2017 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. www.pwc.com