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India continued to be the second largest deal market in Asia Pacific in 2019 for private equity and venture capital funds, registering a record deal value of $45 billion, Bain & Co’s private equity report has said.
This investment level is the highest in the last decade and reflects a 70 per cent jump over the level recorded in 2018, said the report developed in partnership with Indian Private Equity & Venture Capital Association (IVCA).
This surge in PE investments in 2019 is primarily due to the increasing number of large deals greater than $100 million, an increase in their average deal size and a surge in VC investments, the report showed.
This report also found that exit value in 2019 decreased, finishing at nearly $13 billion, compared to $17 billion in 2018 (excluding Flipkart’s exit), but was still the third-highest for the last decade. The dip over last year was due to a decrease in the number of exits from 265 to 200. With an unpredictable public market, strategic sales became the preferred mode of exit, accounting for about 50 per cent of exit volume.
The report also finds that India-focused dry powder will remain healthy, but a potential reduction in investments could occur in H1 2020, accompanied by a price correction across the board.
Record investments
India’s share of the APAC deal market increased to nearly 25 per cent in 2019 and investment value was about 70 per cent higher than 2018 and nearly 110 per cent more than the previous five-year average. Of the top 15 deals in India, which constituted more than 35 per cent of total investment value in 2019, five were in real estate; three in IT and ITES; and the rest across banking, financial services and insurance (BFSI), telecommunications, energy and consumer technology.
From a sector perspective, real estate and infrastructure, telecom, IT and ITES, and BFSI contributed to more than 90 per cent of the growth in investment value.
Arpan Sheth, partner, Bain & Company said: “From an investment perspective, we will likely to see a short-term dip in investment activity with Covid-19, as already evidenced globally. However, this imminent price correction across the board will present an investment opportunity. Investors need to triage their portfolio and take actions to adapt to the changes in the economy which includes taking immediate actions to ensure business continuity and plan for value creation for the future. The market disruption caused by Covid-19 could lead to growth in select pockets such as e-commerce, enterprise technology/SaaS, healthcare, on-demand services.”
Covid-19 impact
The impact of Covid-19 signals could be more significant than other major epidemics due to increased global interconnectedness and the virus’ high spread rate. Based on global financial crisis experience, deals invested during or after a downturn tend to do well. The market disruption caused by Covid-19 will likely lead to growth in select pockets (e-commerce, enterprise technology/SaaS, healthcare, on-demand services) and create investment opportunities
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