Private equity and venture capital (PE/VC) investments in India declined 23 per cent to USD 6.7 billion in the third quarter of this year as investors adopted a cautious approach, says a report.
According to EY India's Private Equity Deal Tracker, the July-September period was also the most under-performing quarter in 2018 in terms of investments. The largest deals in the July-September quarter include Softbank, Sequoia, Lightspeed and others investing USD 1 billion in OYO Rooms, KKR's USD 530 million buyout of Ramky Enviro and AION-JSW's USD 400 million buyout of Monnet Ispat.
On a year to date basis however, PE/VC investments in India are higher by 17.4 per cent and the investment tally also looks set to surpass the previous year high driven by some large deals in the pipeline, provided there is no major macro setback, the report noted.
"PE/VC deal activity was strong in the first half of 2018. However, third quarter data and discussions with PE/VCs suggest that investors are turning cautious. Macro headwinds like rising crude oil prices, depreciating rupee, talk of trade wars have increased uncertainty," said Vivek Soni, Partner and National Leader Private Equity Services, EY India.
Macro headwinds like rising crude oil prices, depreciating rupee and talk of trade wars have increased uncertainty. Moreover, the upcoming 2019 general elections, the slowly evolving NPA scenario and the developing situation around select NBFCs may influence investors to consider taking a wait-and-watch approach in the short-term.
Soni, however, was positive on the medium to long-term prospects of the Indian PE/VC industry.
"As we enter into the fourth quarter of 2018, there is a pipeline of large deals awaiting regulatory approval, which if closed successfully, could lead to another record year for Indian PE/VC industry for investments as well as exits," he noted.