E-commerce dominates PE deals in India’s technology sector: report

E-commerce has become the most attractive space for private equity (PE) investment in India, leading to deals worth a record $11.5 billion in the entire technology sector last year, says a report by Grant Thornton and Indian Private Equity and Venture Capital Association (IVCA) released on Friday.

There were also about 400 mergers and acquisitions in the technology sector, and e-commerce accounted for 75% of the total value of such deals, up from 30% in 2012, says the report.

“A large part of the total deal value consists of big ticket e-commerce PE investments along with large cross-border acquisitions by leading IT majors,” the report said.

The trend continues in 2015.

“While all sub-segments within e-commerce have garnered investor interest in terms of number of deals, e-tailers such as Flipkart andSnapdeal, with their multiple products and brands, have driven big-ticket investments constituting 68% of the total deal value in 2014,” the report said.

“India, from being merely a technology adapter or importer, is now becoming creator for technology enabled disruptive solutions. There is a clear desire and confidence that Indians can create unique solutions for the local market and also compete actively in the global market,” said Harish H.V., partner, Grant Thornton India Llp. “What started as an inflow of investments into e-commerce shopping portals like Snapdeal, Flipkart in 2014, transformed into a full-fledged focused strategy with aggregators likeOla, Quikr, Foodpanda, which secured multi-million dollar investments at billion-dollar valuations,” he said.

Eighty percent of PE investments were under $10 million deals.

“With a stabilizing capital market, stable government and hopes of new reforms, we expect heightened interest from global investors in the Indian economy in the coming year,” said Arvind Mathur, president, IVCA.

Top PE deals in 2014 included Morgan Stanley Investment Management, GIC, Accel Partners, DST Global Solutions Ltd, Iconiq Capital and Sofina Capital investing $1 billion in Flipkart Online Services Pvt. Ltd.

Baillie Gifford and Co., Greenoaks Capital, Steadview Capital,T. Rowe Price Associates, and Qatar Investment Authority and existing investors infused another $700 million in Flipkart.

Softbank Corp. invested $627 million in Snapdeal, and Capital Square Partners, CX Partners and others acquired 100% of Aditya Birla Minacs Worldwide for $260 million.

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