Driven by heightened interest of private equity investors in start-ups and online ventures, the IT & ITeS sector in India attracted $1.64 billion funding in the July-September period, says consultancy firm PwC.
The Information Technology and IT-enabled services sector attracted $1.64 billion through 56 deals, accounting for more-than-half of the total PE investments ($3.01 billion) during the third quarter of 2014, PwC said in its ‘MoneyTree India Report Q3 2014’.
While this is a two-fold jump over the previous quarter from $746 million via 47 deals, the funding is more than 2.5 fold higher compared to the same period last year ($618 million in 41 deals) in the IT-ITeS sector, it added.
The largest deal during the quarter was that of Flipkart ($1 billion), while other deals in the sector included those in Hike ($65 million), Quikr ($60 million), Snapdeal ($50 million), Olacabs ($42 million), Freecharge.in and BigBasket ($33 million each).
“The third quarter of the year has witnessed a stellar performance in the IT & ITeS sector in both value and volume… The average deal size in this sector has also surged in this quarter, from $17.3 million in Q2 to $29.3 million in this quarter,” PwC said.
The average deal size in July-September 2013 period stood at $15.1 million.
The online services sub-sector has received almost 85 per cent of the total deal value, with $1.39 billion coming in through 28 deals.
This was followed by mobile services ($138 million in nine deals) and enterprise software ($79 million in 13 deals).
“e-commerce business continued to attract investor interest driven by strong growth prospects. The e-commerce market continues to be a primarily minority stake market, with the majority of deal flow driven by growth-stage deals,” PwC India Technology Industry Leader Sandeep Ladda said.
New online e-commerce business segments like classifieds, real estate, grocery and healthcare have started to exhibit significant growth opportunities, he added.
Looking ahead, companies in m-commerce and digital technologies (SMAC) are expected to be in favour, Ladda said.
Investments in the growth stage (investments of less than $20 million and third or fourth round of institutional investment) outpaced all other modes during the quarter, witnessing 92 per cent of the total value.
Growth investments in this quarter stood at $1.51 billion, a three-fold increase from the previous quarter and a six-fold growth over July-September 2013.
However, the average deal size in early-stage investments has fallen to $2 million in this quarter.
Bangalore continued its run as the best IT investment destination in this quarter, attracting 72 per cent of the total investments in the sector during this quarter.
The city attracted $1.18 billion in 17 deals, followed by Mumbai ($211 million in 15 deals) and Delhi-NCR ($144 million in nine deals), the report said.