1) Fundraising is increasingly getting hard
- Over 60 funds are on the road to raise an estimated $13B
- Challenges for LPs: bad returns, me-too funds, GP strategy overlaps, relationship fatigue, expensive valuations, team changes
- Recent examples: Warburg's Rajesh Khanna has decided to cease operations of Arka Capital given fundraising challenges
2) Early-stage VC investment has been attractive
- Drivers: e-commerce, mobile and media growth
- Key investments: Fashionandyou and Snapdeal, inMobile
- Key exits: Makemytrip (tech) and MedPlus (non-tech)
- Potential exit candidates: JustDial and One97
3) PIPE deals have been attractive
- Driver: Choppy capital markets have offered opportunities
- Examples: Dedicated focus on PIPE's by Westbridge
4) PE activity remains low in real estate
- Drivers of low growth: Rising real estate prices, and borrowing rates
- Exception: Blackstone's significant real estate investments
5) PE funds are becoming full service
- Deal Examples: KKR completed four debt transactions last year through it's NBFC arm
- Other examples: Goldman, Beacon and Everstone started Indostar Capital Finance Ltd
6) Mezzanine, safe structures emerge
- To avoid risks from economic cycles
- Variety of funds are using debt alongside equity, and are pushing for convertible and mezzanine structures
7) Governance challenges
- Highlight example: Lilliput issues with Bain Cap and TPG
- Other examples: KS Oils and Subhiksha
8) PE exits remain low
- Capital market constraints
- Funds are focusing towards portfolio companies to ensure 'saleable' business
9) Big shots leave to start new funds; examples:
- ICICI's Renuka started Multiples
- Sequoia partners started Westbridge
- Temasek's Manish Kejriwal and General Atlantic's Sunish Sharma started Kedaara Capital Advisors
- CVCI's Ajay Relan started CX Partners
10) Mid-market M&As popular bets
- Specially preferred by those promoters who are not fussy about control
- Good news for large funds, given the typical trend that smaller funds sell to large funds, and large funds sell to strategic buyers
Source: VCCircle
