Private equity bets big on India despite election slump

Fewer deals are being done, but more capital is being deployed, according to data from Grant Thornton.

Private equity firms are spending big in India despite a slowdown in dealmaking before and during the country’s recent election.

Firms deployed $12.5 billion across 306 private equity deals in the first five months of 2019, according to a May PE Dealtracker from professional services business Grant Thornton. Spending almost doubled from the $7.5 billion spent during the same period last year, while deal count declined from 342.

The slump coincided with a month-long general election in April and May, which saw prime minister Narendra Modi retain power.

“In election years you tend to see a slowdown in deal activity,” Kumar Mahtani, managing director and head of the Mumbai office at BDA Partners, told Private Equity International.

“We have a budget announced on Friday and expect a lot of reforms from a government that came in with a thumping majority, so activity will likely pick up again later in the year.”

Major deals this year have included Blackstone’s purchase of a majority stake in packaging business Essel Propack in April for up to $462 million and a $200 million funding round for online grocery start-up Grofers by a consortium including SoftBank’s Vision Fund and Sequoia Capital the following month.

Firms completed at least $5.8 billion of private equity, infrastructure and real assets buyouts last year, compared with $5.4 billion in the previous four years combined, EMPEA’s Industry Statistics Year-End 2018 found.

Blackstone president Jonathan Gray is a “big believer” in India and the firm will be accelerating its activity there, he wrote in The Economic Times in February.

India-focused funds collected $3.2 billion across 16 vehicles last year, up from $2.6 billion in 2017 but less than the previous two years, according to PEI data. ChrysCapital raised $867 million for its eighth India-focused vehicle in January, exceeding its $850 million hard-cap.