www.pwc.com/globalmoneytree www.pwc.in PricewaterhouseCoopers India Pvt Ltd MoneyTree India Q3 2017 Technology Institute This report provides summary results of Q3 16, Q2 17, and Q3 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 9 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 19 PE exits in the sector 20 Definitions 21 PwC MoneyTree India Q3 2017 2
1. Overview 2017 has already exceeded the total investment value for 2016, which stood at 17.5 billion USD, and also surpassed 2015 s record investment value of 19.8 billion USD. This year is now positioned to be the best year for private equity (PE) in India. The first three quarters recorded the highest investment activity with 20 billion USD invested across 477 deals, a 69% increase in value despite a 14% decline in deal volume as compared to the same period in 2016. The top 15 deals for the nine months of 2017 accounted for over 50% of the total deal value. The third quarter of this year alone witnessed investments worth almost 6 billion USD across 127 deals, a 73% increase in value despite a 25% decline in volume as compared to the same period last year. The Technology space garnered the highest investment value with 3.2 billion USD, having recorded the largest PE investment with Softbank s 2.5 billion USD investment in Flipkart. Financial services recorded investments worth 1.2 billion USD across 11 deals, with non-banking financial companies (NBFCs)/micro finance institutions (MFIs) continuing to see activity. The Energy space, dominated by renewables, witnessed investments worth 0.4 billion USD across 4 deals. The Fast-moving consumer goods (FMCG) space, specifically cosmetic companies, attracted investor interest with 0.2 billion USD invested across three deals. The Healthcare sector remained stable, with 0.4 billion USD invested across 13 deals. In terms of investment value, late-stage funding accounted for 65% this quarter, recording a 22% increase over the previous quarter and a 156% increase over the same period last year. Growth-stage funding witnessed a drastic jump over the previous quarter, more than doubling from 0.5 billion USD in Q2 2017 to 1.1 billion USD this quarter. Conversely, buyout deals witnessed a 44% decline in value as compared to the previous quarter, with investments worth 0.5 billion USD. Early-stage investments too appear to be on the decline, having recorded 0.2 billion USD, a 25% decline as compared to the previous quarter and a 41% decline as compared to the same period last year. With regard to PE exit activity, the third quarter of 2017 recorded 44 exits worth 2.7 billion USD, a 33% decline in terms of volume and a 6% decline in terms of value as compared to the previous quarter. The Technology space retained its leading position, recording an exit value of 1.3 billion USD across 11 deals. This was followed by the Financial services space with 7 exits worth 0.6 billion USD. Public market sales monopolised the exit routes, accounting for 40% of the exit value this quarter. Secondary sales showed an upward trend, recording a 26% increase over the previous quarter. Strategic sales nearly quadrupled in terms of value over the previous quarter with 0.4 billion USD across nine exits. While Q3 witnessed a relative slowdown in investment activity as compared to the first two quarters of the year, the Technology, Financial services, Energy and Healthcare sectors attracted significant interest in this quarter. Most of the investment in Technology consisted of funding provided to consumer Internet businesses, which have also seen some consolidation over the last year or so. Sanjeev Krishan Leader, Private Equity and Transaction Services PwC India PwC MoneyTree India Q3 2017 3
2. Analysis of PE investments Total equity investments in PE-backed companies The total amount of private equity (PE) investments in the third quarter of 2017 was just below 6 billion USD (5,965 million USD to be precise) across 127 deals. This represented a 5% decrease in value and a 22% decrease in volume as compared to the previous quarter, when investments worth about 6.3 billion USD were made in 163 deals. Further, as compared to Q3 16 (where PE investments stood at around 3.4 billion USD in 170 deals), the value of deals in this quarter increased by 73%, although the volume of deals fell by 25%. The average deal size for Q3 17 was around 47 million USD. The information technology & IT-enabled services (IT & ITeS) sector retained its firm grip on the top spot in this quarter. The investment inflow of around 3.2 billion USD in 73 deals represented a 19% increase compared to the previous quarter in value terms, despite a 14% decline in deal volume. On the whole, there was a dip in PE investments across sectors in this quarter especially in Telecom, Manufacturing and Media & Entertainment vis-à-vis the previous quarter. However, the FMCG sector turned out to be a major bright spot in this quarter, having attracted 213 million across three deals. As in the previous quarter, late-stage investments were the most popular route for PE investors in Q3 17 with a total of 21 deals worth approximately 3.8 billion USD. Growth-stage deals, which came second, posted a significant 149% increase in value compared to the previous quarter, with investments worth around 1.1 billion USD in 36 deals. Early-stage investments recorded a 25% and 41% decline compared to the previous quarter and year-ago period respectively. Regionally, Bengaluru has left all the other cities far behind with total investments worth around 3 billion USD in 37 deals. With a 74% drop in PE investment value as compared to the last quarter, Mumbai slipped to the third position. Total private equity investments (in US$mn) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 No. of deals 4,577 2,578 2,128 5,403 3,825 118 96 140 179 167 109 135 86 81 50 72 103 100 93 128 106 135 138 152 135 147 133 143 122 120 127 125 111 156 135 136 146 225 187 241 199 214 173 170 233 187 163 127 Value of deals (in US$ Mn) 4,273 3,952 4,026 4,848 3,172 2,729 2,882 2,581 2,397 2,565 2,114 2,198 2,314 2,165 2,348 2,456 1,948 1,749 1,853 1,196 1,384 1,571 1,299 755814865 6,897 4,667 4,465 4,315 4,215 4,209 3,951 3,447 7,806 6,255 5,965 5,621 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 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 PwC MoneyTree India Q3 2017 4
Analysis of PE investments Investments by industry Q3 16, Q2 17 and Q3 17 With 73 deals worth approximately 3.2 billion USD, the IT & ITeS sector continued to dominate sector-wise PE investments in Q3 17. SoftBank Corp s investment of 2.5 billion USD in Flipkart was the main factor behind this lead. IT & ITeS and FMCG were the only two sectors to show an upward trend in deal value compared to the previous quarter. The latter, which received no investments in Q2 17, attracted a remarkable 213 million USD in this quarter. Sequoia Capital India and WestBridge s investment of 172 million USD in Vini Cosmetics accounts for the lion s share of this PE inflow. With investments of around 1.2 billion USD in 11 deals, BFSI held fast to the second spot, although it showed a 5% and 50% decline in deal value and volume respectively compared to the previous quarter. Finally, Telecom and Media & Entertainment both recorded no deals in this quarter. Investments by industry (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Information Technology (IT) and IT enabled Services 1,266 2,687 3,189 140 Energy 571 411 0 Telecom 91 0 927 BFSI 1,303 92 1,236 Manufacturing 121 3 272 Healthcare & Life Sciences 390 390 Food & Beverages 21 58 44 Agri-business Engg. & Construction FMCG Media & Entertainment 42 50 34 295 5 2 213 26 1 0 364 Others 983 440 Q3 2016 Q2 2017 Q3 2017 Note: Others include Education, Shipping & logistics, Textiles & garments, Advertising & marketing, Travel & transport, Other services, Retail, gems & jewelry, Sports & fitness, Hotels & resorts. PwC MoneyTree India Q3 2017 5
Analysis of PE investments Despite a dip in PE investments across sectors, the technology sector saw an upward trend in Q3 2017 compared to the previous quarter. The IT & ITeS industry continued to account for a large share of overall deal value despite a fall in volumes, as funding was mainly concentrated in leading companies that are now relatively established in their respective sectors. Although investors have become selective in their investments, the digital space, comprising the cloud, artificial intelligence and robotics, will attract a lot of attention going forward. At a time when the Indian IT sector is focusing on reskilling its existing workforce in order to adapt to the technological disruptions, home-grown start-ups are driving innovation in the industry by collaborating with global software giants to build niche solutions for the Indian market. Sandeep Ladda Global TMT Tax Leader and Technology Sector Leader PwC India PwC MoneyTree India Q3 2017 6
Analysis of PE investments Investments by stage of development Q3 16, Q2 17 and Q3 17 In the third quarter of 2017, late-stage investments retained the top spot in terms of stage of development, with an inflow of approximately 3.8 billion USD across 21 deals. This was a 22% and a massive 156% increase in deal value compared to the last quarter and year-ago period respectively. Though growth-stage deals lagged behind late-stage investments by a huge margin in terms of deal value, they climbed up to the second spot with a 149% rise from 462 million USD in Q2 17 to around 1.1 billion USD in this quarter. The top three were rounded off by buyout deals, which saw 4 deals worth around 481 million USD. Investments by stage development (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 294 Early 232 174 1,182 Growth 462 1,149 1,503 Late 3,163 3,849 Pre-IPO deals registered a major decline from 384 million USD in the previous quarter to 1 million in Q3 17, both across just one deal. Pre-IPO PIPE 0 1 384 144 378 296 Buyout 277 481 859 Other 47 16 778 Q3 2016 Q2 2017 Q3 2017 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. PwC MoneyTree India Q3 2017 7
Analysis of PE investments Investments by region Q3 16, Q2 17 and Q3 17 In terms of region, Bengaluru, NCR and Mumbai constituted the top three cities for PE investments in Q3 17 (in that order). Investments by region (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 With investments worth around 3 billion USD across 37 deals, Bengaluru surged ahead of the other cities, witnessing a 388% jump in PE investment value compared to the last quarter. NCR, which recorded investments worth 857 million USD in 36 deals, hung on to the second position, although it registered a 59% and 14% decline in deal value compared to the previous quarter and year-ago period respectively. Faced with a 74% decrease in PE investment value, Mumbai dropped to the third spot in this quarter, attracting only 577 million USD in 17 deals. Bengaluru Mumbai NCR #N/A 618 577 857 992 1,526 2,078 2,261 3,020 Notably, Hyderabad witnessed a 51% and 506% increase in deal value compared to Q2 17 and Q3 16 respectively, with an inflow of 443 million USD across 6 deals. Hyderabad Chennai 73 292 443 158 52 55 Others 219 953 1,013 Q3 2016 Q2 2017 Q3 2017 Note: NCR includes Delhi, Gurgaon and Noida. PwC MoneyTree India Q3 2017 8
Analysis of PE investments Top 20 PE deals Q3 17 The top 20 deals comprised 84% of the total deal value in Q3 17. The top five deals together accounted for nearly 59% of the total deal value. The average deal size for this quarter was around 47 million USD. Top 20 PE deals in Q3 2017 Company Industry Investors Amount (US$M) Flipkart IT & ITES SoftBank Corp 2,500 SBI Cards & Payment Services BFSI Carlyle 300 RBL Bank BFSI CDC Group, Multiples PE, Others 260 Karvy Computershare BFSI General Atlantic 240 First Solar India Energy IDFC Alternatives 200 Radiant Life Care Healthcare & Life Sciences KKR 200 Vini Cosmetics FMCG Sequoia Capital India, WestBridge 172 Janalakshmi Financial Services Dixcy Textiles BFSI Textiles & Garments Morgan Stanley, TPG Capital, Tree Line Asia Master Fund, Others Advent International 150 Aditya Birla Capital BFSI PremjiInvest 109 CleanMax Enviro Energy Solutions Energy Warburg Pincus 108 Just Buy Live IT & ITES Ali Cloud Investments 100 Engie Abraaj JV Energy Abraaj Group 100 Druva Software IT & ITES Sequoia Capital India, Nexus Venture Partners, Tenaya Capital, Riverwood Capital, Others Apollo LogiSolutions Manyavar Shipping & Logistics Textiles & Garments Piramal Enterprises 75 Kedaara Capital 63 Avendus Capital BFSI Gaja Capital, KKR, Others 55 Apttus IT & ITES PremjiInvest, Others 55 Five Star Business Credits BFSI Sequoia Capital India, Norwest 50 Campus Activewear Retail TPG Growth, Others 47 161 80 PwC MoneyTree India Q3 2017 9
3. Analysis of PE exits Total PE exits Q3 17 Q3 17 saw a 6% decrease in value and a 33% decline in the volume of PE exits compared to the last quarter. In all, there were 44 deals worth around 2.7 billion USD in comparison to 66 deals worth around 2.9 billion USD in the previous quarter. Further, there was a 6% increase in deal value compared to the year-ago period (approximately 2.6 billion USD in 77 deals). In Q3 17, IT & ITeS was again the top sector for PE exits, with a total of 11 deals worth around 1.3 billion USD. BFSI and Energy took up the second and third positions respectively, with exits worth around 597 million USD in 7 deals and 486 million USD in 2 deals, respectively. The latter, in particular, showed a dramatic increase in exit value in comparison to both the previous quarter and year-ago period. Public market sales once again emerged as the top exit route in this quarter, with a total value of around 1.1 billion USD in 25 deals. Secondary and strategic sales were the second and third most preferred route respectively. Strategic sales witnessed a remarkable 292% increase in exit value over the previous quarter, jumping from 99 million USD in 10 deals in Q2 17 to 390 million USD across 9 deals in Q3 17. Total PE exits (in US$ mn) Total PE exits 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 No. of deals 0 1,514 801 669 789 948 308 210268 277 Value of deals (in US$ Mn) 1,227 706 973 1,005 604 370 3,079 1,080 780 795 431 1,324 1,913 1,597 1,476 1,122 1,216 403 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 73 73 55 69 43 53 77 78 70 66 44 448 470 3,977 1,289 1,238 1,331 3,365 2,567 2,317 1,978 1,997 1,820 1,774 1,394 2,899 2,726 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 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 PwC MoneyTree India Q3 2017 10
Analysis of PE exits Exits by industry Q3 16, Q2 17 and Q3 17 With 11 deals worth about 1.3 billion USD, the IT & ITeS sector continued to lead exits by industry in Q3 17. This was a 74% increase in exit value compared to the last quarter (where exits stood at 718 million USD in 15 deals) and a 52% increase compared to the previous year (around 821 million USD in 19 deals). The top two exits in this quarter were in the IT & ITeS sector. As in Q2 17, BFSI was again the second largest sector for exits, with seven exits worth around 597 million USD. This represented a 10% decrease in value compared to the previous quarter, which saw exits worth about 659 million USD in 13 deals. Exits by industry (in US$ mn) 0 200 400 600 800 1,000 1,200 1,400 409 BFSI 659 597 821 IT & ITES 718 1,250 248 Manufacturing 422 138 The Energy sector saw two major exits worth 486 million USD (from Mytrah Energy and Green Infra). This constituted a huge jump in exit value compared to both the previous quarter and the year-ago period. Finally, both and Manufacturing and Healthcare & Life sciences witnessed a significant decline in deal value, closing with 138 million in nine deals and 92 million in five deals respectively. Energy Healthcare & Life Sciences Others 10 51 92 165 486 556 427 492 653 Q3 2016 Q2 2017 Q3 2017 Note: Others include Education, Shipping & logistics, Textiles & garments, Advertising & marketing, Travel & transport, Other services, Retail, gems & jewelry, Sports & fitness, Hotels & resorts. PwC MoneyTree India Q3 2017 11
Analysis of PE exits Exits by type Q3 16, Q2 17 and Q3 17 Public market sales were again the number one exit route for PE investors in this quarter, with a total exit value of around 1.1 billion USD in 25 deals. This was a 33% drop in exit value in comparison to Q2 17 (around 1.6 billion USD in 40 deals) but a 47% increase vis-à-vis Q3 16 (41 exits worth 744 million USD). Two notable shifts occurred in Strategic sales and Buyback deals. In the case of the former, there was a 292% jump in the value of deals from 99 million USD in Q2 17 to 390 million USD in this quarter. Finally, exits through the buyback route witnessed a massive spike in value from 5 million USD in Q3 16 to 295 million USD in Q3 17. Exits by type (in US$ mn) 5 Buyback 366 295 Public market sale 744 1,097 1,643 Secondary sale 409 750 944 Strategic sale 99 390 1,410 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Q3 2016 Q2 2017 Q3 2017 PwC MoneyTree India Q3 2017 12
Analysis of PE exits Top five PE exits Q3 17 The top five exits comprised nearly 67% of the total exit value in Q3 17. Top 5 PE exits in Q3 2017 Company Industry Investor Deal Amount (US$ M) Flipkart IT & ITES Tiger Global 800 GENPACT IT & ITES GIC, Bain Capital 287 Mytrah Energy Energy Merrill Lynch, IDFC Project Equity, Apollo Management, AION Capital 266 AU Small Finance Bank BFSI Warburg Pincus, IFC, ChrysCapital, Kedaara Capital Green Infra Energy IDFC PE 220 247 PwC MoneyTree India Q3 2017 13
4. Active PE firms In Q3 17, Sequoia Capital India entered into 11 deals; Accel India followed with nine deals. A select group of other active PE investors this quarter is listed alongside. Q3 2017 Investors No. of deals Sequoia Capital India 11 Accel India 9 Blume Ventures 5 Nexus Venture Partners 5 Kalaari Capital 5 DSG Consumer Partners 4 Kae Capital 4 Beenext 3 YourNest 3 Saama Capital 3 Matrix Partners India 3 IFC 3 Eight Roads Ventures 3 IDG Ventures India 3 SAIF 3 Jungle Ventures 3 * Number of deals includes both single and co-investments 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 MoneyTree India Q3 2017 14
5. Sector focus IT & ITeS sector In Q3 2017, the Indian IT & ITeS industry continued to grapple with the technological disruptions challenging the existing business models of IT players. The 150 billion USD industry is going through one of its most demanding phases, with the rise of robotics, the cloud and automation forcing companies to rethink and retool their traditional offerings for future growth. IT companies are encouraging and adopting new digital skills such as artificial intelligence (AI), the blockchain and cloud. However, this has not been enough to offset the slowdown in traditional areas of business. In this environment of lean demand, the adoption of digital automation and AI has led to a decline in headcount growth. Reports of companies laying off employees have been surfacing since the start of the year, but this quarter actually saw four out of the top six Indian IT services companies report a dip in their headcount numbers. In order to survive this new wave of disruption, Indian IT firms will have to invest in emerging technology adoption and rigorously examine their existing portfolio of investments to shed their back-office image and position themselves as strategic partners in the global value chain. Recognising this need, the government is also looking to form a comprehensive strategy to promote the adoption of emerging technologies such as IoT and AI. Its decision to form expert groups to assess the potential of digital technologies and define regulatory frameworks will further boost the Indian IT industry s efforts towards developing the requisite competencies and capabilities to exploit global opportunities. Apart from promoting large-scale use in the government, these initiatives will also help promote research and development and start-ups in this space. India s recent significant jump to the 100th rank from 130th on the World Bank s Ease of Doing Business index highlights the government s consistent efforts to position the country as an attractive destination for investors to do business. The funding drought of 2016 in India s ecommerce market seems to be easing as this quarter saw big players such as Flipkart, Ola and Paytm attract large investments. Unlike in the past, when funding was more broad-based, investors have become tight-fisted about funding tech start-ups as the return on investment (ROI) and profitability continue to remain a challenge and focus for India s startup ecosystem. Sandeep Ladda Global TMT Tax Leader and India Technology Sector Leader PwC India PwC MoneyTree India Q3 2017 15
Sector focus IT & ITeS sector Total PE investments In Q3 17, the IT & ITeS sector attracted PE investments worth around 3.2 billion USD in 73 deals. This was an increase in the value of investments compared not only to the last quarter (around 2.7 billion USD in 85 deals) but also the year-ago period (around 1.3 billion USD in 93 deals). Late-stage deals were the preferred route for PE investments in the IT & ITeS sector in this quarter, with three deals worth around 2.5 billion USD. Growth-stage deals and early-stage deals came in second and third with around 491 million USD in 19 deals and around 157 million USD in 47 deals, respectively. Bengaluru gained the top spot in this quarter, with investments of approximately 2.7 billion USD in 25 deals. NCR and Mumbai came in second and third with investments worth 187 million USD in 23 deals and 127 million USD in nine deals, respectively. Online services overtook the other sub-segments, recording around 2.7 billion USD in 29 deals. Further, Mobile VAS witnessed a major decline in investments from around 1.5 billion USD in Q2 17 to 83 million USD in Q3 17. The average deal size in this quarter was around 44 million USD compared to about 32 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 1,000 625 647 791 555 307 353 422 515 443 397 500 233 165 273 311 347 30 312 99 65 106 111148 0 2423 648 481 181 150 988 985 772 1568 2635 3846 1992 1893 3640 1376 1409 1247 1266 1132 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 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 3189 2687 PwC MoneyTree India Q3 2017 16
Sector focus IT & ITeS sector Investments by stage of development Q3 16, Q2 17 and Q3 17 As in Q2 17, late-stage deals were the preferred route for PE investments in Q3 17 as well. This route continued to enjoy an upward trend, with investments worth 455 million USD in six deals in Q3 16, around 1.9 billion USD in six deals in Q2 17 and around 2.5 billion USD in three deals in Q3 17. Growth-stage deals, which followed, accounted for investments worth around 491 million USD in 19 deals. This was a 111% increase in investments in comparison to the last quarter. Early-stage deals rounded off the top three, with investments worth around 157 million USD in 47 deals. Investments by stage of development (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 93 Buyout 357 1 193 Early 162 157 In Q3 17, the value of PIPE and buyout deals decreased by 100% in comparison to the last quarter. While the buyout stage had one deal worth approximately 1 million USD, the PIPE route saw no deals in this quarter. Growth 233 488 491 455 Late 1,887 2,523 PIPE 30 36 Q3 2016 Q2 2017 Q3 2017 PwC MoneyTree India Q3 2017 17
Sector focus IT & ITeS sector Investments by region Q3 16, Q2 17 and Q3 17 Region-wise, Bengaluru overshadowed the other cities in Q3 17. It recorded investments worth around 2.7 billion USD in 25 deals. This was a 978% increase from the previous quarter (248 million USD in 27 deals) and a 939% increase from the year-ago period (258 million USD in 29 deals). In comparison to Q2 17, in this quarter, NCR (187 million USD in 23 deals) and Mumbai (127 million USD in nine deals) experienced a drop of 87% and 73% in investments, respectively. While Hyderabad recorded 78 million USD in four deals last quarter, the city attracted investments worth only 3 million USD in two deals in this quarter. This was a staggering 96% drop in investments. Investments by region (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 258 Bengaluru 248 2,678 242 Mumbai 467 127 632 NCR 1,487 187 18 Chennai 12 5 Hyderabad 17 78 3 Others 99 190 394 Q3 2016 Q2 2017 Q3 2017 PwC MoneyTree India Q3 2017 18
Sector focus IT & ITeS sector Investments by subsector Q3 16, Q2 17 and Q3 17 Online services recorded the highest amount of investments by subsector, with around 2.7 billion USD in 29 deals. With 421 million USD in 40 deals in the last quarter, the sector experienced a 541% growth in investments in Q3 17. Investments by subsector (in US$ mn) 0 500 1,000 1,500 2,000 2,500 3,000 Enterprise software came in at number two with 247 million USD in 19 deals, and mobile VAS was a distant third with 83 million USD in 14 deals. BPO services, which came in second last quarter, received no investments in this quarter. Online Services BPO Mobile VAS 115 83 343 421 635 592 1,516 2,696 Enterprise Software 131 70 247 IT Services 31 18 1 Others 53 28 163 Q3 2016 Q2 2017 Q3 2017 PwC MoneyTree India Q3 2017 19
Sector focus IT & ITeS sector PE exits in the sector Q3 16, Q2 17 and Q3 17 In comparison to Q2 17, Q3 17 saw a 74% increase in exit value in the IT & ITeS sector, with 11 deals worth approximately 1.3 billion USD. This was a 52% rise in exit value in comparison to the year-ago period, which saw 19 deals worth 821 million USD. Total IT & ITeS exits 2,500 Secondary sales were the preferred exit route in this quarter, with exits worth 800 million USD in one deal. With exits worth 887 million USD in four deals, online services saw a record 1114% increase in deal value in comparison to the previous quarter. 2,000 1,500 1,719 1,944 1,250 1,056 1,104 1,000 500 393 261 287 340 258 225 225 162 156 154 78 56 67 96 129 19 12 12 32 25 48 106 0 612 519 194 498 181 185 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 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 10 448 685 103 622 427 98 821 312 718 No. of deals 9 16 8 14 11 7 8 9 5 4 3 5 4 8 4 13 9 11 9 8 4 5 10 9 8 9 9 14 9 7 6 15 18 15 9 16 15 14 19 15 11 15 11 PwC MoneyTree India Q3 2017 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 spin-outs 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 Q3 2017 21
www.pwc.com/globalmoneytree www.pwc.in Contacts About PwC s Technology Institute Sandeep Ladda Global TMT Tax Leader and India Technology Sector Leader PwC India sandeep.ladda@in.pwc.com Sanjeev Krishan Leader, Private Equity and Transaction Services 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 Trishann Henriques Associate, Markets & Industries PwC India trishann.henriques@in.pwc.com Suneet Mohan Knowledge Manager, Technology Sector PwC India suneet.mohan @in.pwc.com 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