Sectors likely to attract maximum number of PE-VC transactions are clean-tech, consumer products & services, microfinance, mobile VAS & consumer Internet, aerospace, defence and the rural & healthcare space
Big-ticket deals in the private equity (PE) and venture capital (VC) space are likely to make a comeback this year as the downturn has made valuations more realistic and economic conditions are showing signs of stability, believe experts.
"There is definitely an upturn in terms of the quality of deals in the recent past. Besides, the slowdown has brought more sanity and clarity in the investing scenario with valuations of companies (the) world over plummeting last year due to an adverse impact on their fund-raising plans," Reliance Venture Asset Management chief executive Harshal J Shah told PTI.
Echoing a similar view, VCCEdge research director Rohit Madan said, "There was an aura of uncertainty which is now lifting. It was more about sustenance than expansion. As economic conditions stabilise and credit markets return, funds are coming back to the table and looking at new deals."
According to VCCEdge, the financial research platform of VCCircle.Com, private equity investments in India in the first two months of this year stood at $465 million. Meanwhile, the total number of VC investments announced during February this year stood at three amounting to $11 million as against eight deals worth $31.10 million in the year-ago period.
Elaborating further, Mr Shah said that the market was seeing a lot of good and valuable deals coming at the 'right valuations'.
Besides, the quality of deals improved because the downturn has made valuations more realistic and has resulted in manageable expectations among entrepreneurs and investors in terms of executing business plans, he added.
"I see a lot more conservative but realistic valuations and a greater deal flow in 2010 as compared to 2009," Mr Shah said.
VCCEdge's Mr Madan believes that though there will definitely be some big-ticket deals in the coming months, it is unlikely that they will match up to 2007 or even 2008 levels.
The sectors that are likely to attract maximum number of PE-VC transactions are—clean-tech, consumer products & services, microfinance, mobile VAS & consumer Internet, aerospace, defence, rural and healthcare space.
However, SMC Capitals equity head Jagannadham Thunuguntla said, "The deal volume may remain lacklustre in the near future, as valuations have stretched on the back of strong capital market rally and PE investors are unable to match up to that speed."