Riding on the back of $11.7-billion investments in Jio Platforms and Reliance Retail Ventures Ltd (RRVL), the private equity and venture capital (PE/VC) sector recorded investments worth $28.9 billion during the January-September period.

The investments across 686 deals fell by 21 per cent in terms of value during the the nine-month period from $36.4 billion recorded during the same period in 2019, according to a report by the Indian Private Equity & Venture Capital Association and EY (IVCA-EY).

The investments in Jio Platforms and Reliance Retail accounted for 40 per cent of all PE/VC investments in 2020. Excluding the investments in Reliance Industries’ subsidiaries, PE/VC investments in 2020 are significantly lower at $17.2 billion, a 53 per cent fall from the same period last year.

In terms of volume, the number of deals in 2020 for the reporting period declined by 10 per cent, compared with the same period of last year (686 deals in 2020 vs 764 deals in 2019).

“Ex-Reliance Group investments, we expect Indian PE/VC investments to close the year at about $24-28 billion, broadly in line with our earlier estimate of $26 billion,” Vivek Soni, Partner and National Leader Private Equity Services at EY, said.

Sectors focused on essential goods and services like pharmaceuticals, telecom, digital technology and ed-tech among others have received a major chunk of PE/VC investments. Some of last year’s favourites such as infrastructure, real estate and financial services have witnessed significant decline in investment flows.

All deal segments recorded decline in PE/VC investments with buyouts being the most affected. At $2.9 billion, buyouts declined by 79 per cent in terms of value and 54 per cent in terms of volume in January-September 2020, which is also the lowest value of buyouts in the last three years for the period under consideration, according to the report.

One of the biggest reasons for the decline in PE/VC investments in 2020 is the under-performance of infrastructure and real estate sectors, which attracted the highest PE/VC investment in 2019 at $16.1 billion for January-September ($20 billion for full year). This accounted for 44 per cent of all PE/VC investments in 2019 (January-September).

Exits

For the reporting period, exits declined by 54 per cent in value terms ($3.6 billion vs $7.8 billion in 2019) and is the lowest value in six years for the period under consideration. In terms of volume, exits declined by 13 per cent, compared with 2019 (100 deals in 2020 vs 115 deals in 2019).

The decline was mainly due to fewer large deals.

Exits via open market were the highest at $1.9 billion (49 deals) in 2020 during the period January-September, a 20 per cent decline compared to the same period in 2019. Exits via initial public offerings (IPOs) were second in line, with $1.1 billion recorded across four IPOs ($247 million across seven IPOs during January-September 2019), which includes the $1-billion SBI Cards partial exit by Carlyle.

Exits via strategic sale recorded $425 million (32 deals) in January-September 2020, 71 per cent decline compared to the same period in 2019, while that through secondary sale recorded $79 million (10 deals), the lowest value in over five years.

From a sector perspective, financial services recorded the highest value of exits during January-September 2020 ($2 billion across 28 deals) accounting for 57 per cent of all exits by value.

Fund-raise

The reporting nine-month period saw $4.4 billion in fund-raise, which was 45 per cent lower compared to the same period last year ($7.9 billion in 2019). There were only nine fund-raises of over $100 million in 2020 (year-to-date) compared to 19 in the same period last year. The largest fund-raise in 2020 saw Sequoia raise a $1.4-billion venture fund for investments in India and Southeast Asia, followed by Nalanda Capital’s $748-million fund-raise.

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