India’s IT/ITES, consumer tech and healthcare sectors are expected to continue to be a big draw for private equity investments in 2021, the Bain & Co’s India Private Equity Report 2021 said on Wednesday.

Banking and Financial services and Insurance (BFSI) is also set to recover in 2021, the report highlighted.

Despite the uncertainty caused by the Covid-19 crisis, the year 2020 saw record $62.2 billion private equity investments in the country and this was up 38 per cent over the previous year, according to the report.

The pandemic led to a shift in the type of deals made, with investors focusing on alternate investment strategies such as distressed opportunistic sales and qualified institutional placements, the report showed. The top 15 deals in 2020 constituted around 40 per cent of deal value as against 35 per cent in 2019. From a sector standpoint, in absolute terms, consumer tech and IT and IT enabled services (ITES) were the largest sectors in 2020 while healthcare saw the highest growth of around 60 per cent, over 2019.

“2020 was an interesting year, with Covid-19 appending some forecasts and trends whilst reinforcing and accelerating others. In terms of sectors, consumer tech and IT/ITES remained buoyant and were the largest sectors in 2020.Consumer tech investments were driven by accelerated growth in digital channels and spiked user adoption of on demand, at-home cross-tech services. This led to a surge in EdTech, fintech, verticalised e-commerce and foodtech with big-ticket investments in Byju’s, Zomato, FirstCry etc.,” Sriwatsan Krishnan, Partner and Leader in Bain & Co’s Private Equity and Technology Practices said.

He said that within IT and ITES, one witnessed significant interest in SaaS and increased corporate focus on digital IT readiness that drove multiple $100 million plus deals. Some of the large investments include Zenoti and Postman in Saas and Virtusa and Majesco in IT services/solutions.

Although overall investment activity remained muted from March 2020 to May 2020 due to Covid-19 lead uncertainties, investor confidence recovered strongly in the second half of 2020 to pre-Covid levels with late stage and bought out deals witnessing increased traction, the report said.

Meanwhile, almost 90 per cent of India-based PE funds concur that portfolios have largely been able to ride out the storm and are focused on efforts to stay ahead of the curve. Additionally, a growing number of funds are focusing on sustainability and environment, social and governance (ESG) issues. Covid-19 played a pivotal role in accelerating multiple trends, including the increase of online touch points, emergence of direct to consumer players, adoption of remote working and focus on healthier living, the report added.

On the crucial issue of exits, the report highlighted that exit volume remained buoyant while overall exit value declined by 30 per cent year-on-year in 2020. But 2020 saw an unprecedented increase in exit returns driven by high multiples on invested capital and large volume share of consumer tech, IT/ITES and BFSI exits. The top 10 exits accounted for 60 per cent of exit value, up from 50 per cent in 2019, with BFSI, real estate and IT/ITES being the largest contributors, the report added.

Related Topics
comment COMMENT NOW