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The cumulative value of private equity and venture capital investments in the country between 2011 and 2020 totalled $232.4 billion, which is more than twice the value recorded during the preceding decade.
The past decade (2011-2020) also saw Indian PE-VC industry come of age and into the mainstream, and witnessed many structural shifts including changes in the investor mix, deal type, deal size and sectors, according to a report by Indian Private Equity & Venture Capital Association and EY (IVCA-EY).
Source of FDI
“The year 2020 was a defining year that saw the impact of the pandemic, digital acceleration and spotlight on policies on pharmaceuticals, healthcare, infrastructure and manufacturing. Notwithstanding the challenges thrown up by the pandemic, the Indian PE-VC ecosystem has only become more resilient and better at finding newer opportunities bringing in much needed capital into the country; it is the single largest source of much needed Foreign Direct Investment (FDI),” Renuka Ramnath, Chairperson, IVCA and Founder, Managing Director and CEO of Multiples Alternate Asset Management Pvt. Ltd, said.
“PE-VC backed companies are helping the cause of nation building by bringing in new business models, creating new jobs, backing entrepreneurs, and helping fund financial inclusion, better infrastructure, increase renewable energy and promote capital efficiency in the Indian economy,” she said, adding, during the past decade, Indian PE-VC investments grew in dollar value to $47.5 billion in 2020, from $8.4 billion in 2010.
A large part of the funds invested was sourced from globally fungible pools of capital managed by international General Partners (GP) as only $58.2 billion of India dedicated funds were raised between 2011 and 2020. This is about 25 per cent of the PE-VC investments of $232.4 billion invested during this period.
“The decade was a pivotal one for the Indian PE-VC industry during which it grew from a nascent asset class to a mature ecosystem, crossing many significant milestones. In this decade, PE-VC investments grew at a compounded annual growth rate of 19 per cent aggregating to a total of $232.4 billion. A major portion of these investments came in the last four years, accounting for 68 per cent of all the PE/VC investments made during the decade,” Vivek Soni, Partner and National Leader for Private Equity Services, EY, said.
Attractive destination
Based on the strong foundation laid in the previous decade, the Indian PE-VC industry is expected to grow further as large global Limited Partners (LP) increase their allocations towards the emerging markets in general and India in particular.
Additional factors like a ‘reform oriented’ government, implementation of business-friendly policies, emergence of new investment structures like InvITs, REITS and SPACs as well as a thriving start-up ecosystem are expected to enhance India’s status as an attractive destination for PE-VC capital, the report said.
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