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As Covid struck, it appeared in April that investments from venture capital/private equity (VC/PE) were heading for a disastrous 2020. But the $9.8-billion investments into Jio Platforms in May completely changed the dynamics of the VC/PE investment scenario. And, as a steady flow of investment opportunities came up through the year,the VC/PE sector ended on a happy note.
Despite the pandemic, VC/PE investments totalled $38.5 billion in 2020 (as of December 25), higher than the $36.3 billion in 2019 and $36.4 billion in 2018, according to data from Venture Intelligence.
Out of the $38.5-billion VC/PE investment this year, the Reliance group alone got $17.3 billion, or around 45 per cent. But for this, VC/PE investments in 2020 would have plunged to less than $20 billion.
All three Reliance group companies — Jio Platforms, Reliance Retail and Reliance Digital Fibre — got VC/PE investments of over $1 billion. Only Piramal Glass joined them with around $1 billion, while the remaining 762 companies got less than $700 million, according to the data.
Fewer deals, higher value
Though the number of deals declined to 766 in 2020 against 1,008 in 2019 and 983 in 2018, the value was higher than the previous two years, said Arun Natarajan, Founder, Venture Intelligence. “Investment in Reliance brought in other investors in the second half of the year,” he added.
Agreeing with Natarajan, Skanda Jayaraman, Managing Director & Head - Investment Banking, Spark Capital Advisors (India) Private Ltd, said there was no dearth of new models in the marketplace.
Although Reliance consumed a majority of the ‘new to India’ capital, it has definitely opened the floodgates for similar funds to take note of Indian investments, he said.
Opening the floodgates
According to Chandrasekar Kandasamy, Founder and Managing Partner, Stakeboat Capital, given the Covid-19 situation, a number of companies were affected during the April to June quarter. Global investors, including Indian VC/PE investors, decided to take a pause on investing in new companies (or doing follow-on investments) to ensure that their portfolio companies got back on track. They were focussed on improving cash flows and reducing expenses to reduce the cash burn of the companies.
However, investment in Jio Platforms strongly validated the growth opportunity in India and infused confidence in global investors.
It also helped bring in a fair number of FIIs back into the secondary markets, as seen from the growth in Sensex, he added.
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