PE investment subdued in India in first quarter of FY24
Except a single large deal of GIC and Brookfield REIT, private equity investors stay away from the market in June quarter
- Jul 10, 2023,
- Updated Jul 10, 2023 4:02 PM IST
After touching the $2-billion mark in April-June last year, private equity (PE) investments dipped marginally by 5 per cent year-on-year in Q1 FY24 to $1.9 billion. While the drop in investment capital was marginal, there is a catch. A closer look at the latest data published by Anarock shows that apart from a single large ticket deal, PE activity in India remained mostly muted.
In top markets like Delhi-NCR and Bengaluru that have been the hotbed of activities in the recent past, there were no PE investments. In Q1FY23 Delhi-NCR accounted for 47 per cent of PE investments. Among the leading commercial markets, Mumbai witnessed some PE activity with deals worth over $400 million, forming 22 per cent share of the overall PE investments during the quarter.
Out of the $1.9 billion overall, 94 per cent came against equity, while the rest was debt investment. In the year-ago period, 80 per cent was in equity and 20 per cent was in debt. While in Q1FY23, 10 per cent of the amount was from domestic investors, this year the share fell to 6 per cent as 94 per cent of the funds came from foreign investors.
The $1.4-billion deal between Brookfield Asset Management’s PE fund and a consortium led by Brookfield India Real Estate Trust REIT and GIC formed 74 per cent of the overall PE investments during April-June quarter. As a result, the average ticket size surged 92 per cent YoY to US$ 192 million in Q1FY24.
“Excluding this deal, private equity activity remained subdued owing to a high interest rate environment and global uncertainties. PE transactions in Indian real estate are, in any case, tilted towards equity investments in office assets by foreign investors. The single large deal between the consortium of GIC and Brookfield REIT with Brookfield AMC has further skewed the mix during the quarter,” said Shobhit Agarwal, MD & CEO of Anarock Capital.
According to Gagan Randev, Executive Director, India, Sotheby’s International Realty, the slight decline in PE investment during the April-June quarter can be attributed to the temporary slowdown and disruptions in the global economy. “Investments in office assets have been severely affected in North America by the sharp rise in interest rates and this has resulted in an upheaval in the markets there,” he said.
Randev, however, expects the slump to be transient. “We anticipate an increase in PE investment in the upcoming quarter. India's robust economic growth and the rising demand for Grade A office spaces, sharp rebound in Retail and strong Warehousing demand post-Covid indicate a positive outlook,” he added.
After touching the $2-billion mark in April-June last year, private equity (PE) investments dipped marginally by 5 per cent year-on-year in Q1 FY24 to $1.9 billion. While the drop in investment capital was marginal, there is a catch. A closer look at the latest data published by Anarock shows that apart from a single large ticket deal, PE activity in India remained mostly muted.
In top markets like Delhi-NCR and Bengaluru that have been the hotbed of activities in the recent past, there were no PE investments. In Q1FY23 Delhi-NCR accounted for 47 per cent of PE investments. Among the leading commercial markets, Mumbai witnessed some PE activity with deals worth over $400 million, forming 22 per cent share of the overall PE investments during the quarter.
Out of the $1.9 billion overall, 94 per cent came against equity, while the rest was debt investment. In the year-ago period, 80 per cent was in equity and 20 per cent was in debt. While in Q1FY23, 10 per cent of the amount was from domestic investors, this year the share fell to 6 per cent as 94 per cent of the funds came from foreign investors.
The $1.4-billion deal between Brookfield Asset Management’s PE fund and a consortium led by Brookfield India Real Estate Trust REIT and GIC formed 74 per cent of the overall PE investments during April-June quarter. As a result, the average ticket size surged 92 per cent YoY to US$ 192 million in Q1FY24.
“Excluding this deal, private equity activity remained subdued owing to a high interest rate environment and global uncertainties. PE transactions in Indian real estate are, in any case, tilted towards equity investments in office assets by foreign investors. The single large deal between the consortium of GIC and Brookfield REIT with Brookfield AMC has further skewed the mix during the quarter,” said Shobhit Agarwal, MD & CEO of Anarock Capital.
According to Gagan Randev, Executive Director, India, Sotheby’s International Realty, the slight decline in PE investment during the April-June quarter can be attributed to the temporary slowdown and disruptions in the global economy. “Investments in office assets have been severely affected in North America by the sharp rise in interest rates and this has resulted in an upheaval in the markets there,” he said.
Randev, however, expects the slump to be transient. “We anticipate an increase in PE investment in the upcoming quarter. India's robust economic growth and the rising demand for Grade A office spaces, sharp rebound in Retail and strong Warehousing demand post-Covid indicate a positive outlook,” he added.