PE/VC investments at $5.4 bn almost doubled in May: report

The Private Equity and Venture Capital (PE/VC) sector recorded investments worth $5.4 billion across 58 deals in May, with $4.6 billion invested in Jio Platforms. The PE/VC investments during the reporting month were 92 per cent higher compared with $2.8 billion recorded during the same month a year ago. Exits stood at $286 million across 11 deals, with the financial services sector accounted for over 60 per cent of all exits by value and volume.

“The fund-raising spree by Jio Platforms has pushed Indian PE/VC investment in May 2020 above $5 billion. Adjusting for these marquee deals, Indian PE/VC investment activity is on a downward trajectory. Nonetheless, these deals help highlight investor confidence in the India story,” Vivek Soni, Partner and National Leader-Private Equity Services at EY India, said.

“As anticipated, the defensive sectors are witnessing renewed interest from investors. In May 2020, the lifesciences sector received the second highest amount of PE/VC investments of $354 million (after telecom). On the exits front, the financial services sector recorded the highest value of exits as investors looked to book some profits in listed securities after the recent recovery in the equity indices,” he said.

However, 85 per cent of investments in May 2020 were due to the Jio Platforms PE deals. If not for Jio Platforms, PE/VC investments would have posted a fourth straight month of decline, recording just $791 million in investments, a 72 per cent year-on-year (YoY) decline and 15 per cent lower than April 2020.

In volume terms, deals during the reporting month fell 28 per cent YoY and 23 per cent sequentially (58 deals in May 2020 vs. 80 deals in May 2019 vs. 75 deals in April 2020). In May 2020, growth investments were the highest in value with $4.9 billion across 12 deals ($846 million in May 2019), followed by buyouts worth $283 million across three deals ($100 million in May 2019) and start-up investments worth $172 million ($594 million in May 2019).

Private Investment In Public Equity (PIPE) deals worth $110 million across three deals were recorded in May 2020 compared to $62 million across two deals in May 2019.

Telecom top sector

The telecom sector ($4.6 billion across four deals) emerged the top sector due to Jio Platforms, followed by the lifesciences sector ($354 million across four deals), which includes Carlyle’s buy-out of 74 per cent stake in SeQuent Scientific Ltd for $210 million, and financial services ($309 million across 16 deals).

Exits

The month under review recorded 11 exits worth $286 million, a 24 per cent YoY fall and 2.4 times the value recorded in the previous month. The largest exit in May saw Warburg Pincus sell its 8 per cent stake in Laurus Labs for $50 million.

During the month, open market exits were highest at $270 million across nine deals, accounting for 94 per cent of all exits by value and 82 per cent by volume. Financial services was the top sector in May, with seven exits worth $188 million and accounting for 66 per cent of all exits by value and 64 per cent by volume.

Fund raise

The reporting month recorded a fund-raise worth $50 million, compared with nil in April, which included a $45 million top-up to its first fund by Iron Pillar. In the first five months of 2020, there have been only $1.5 billion worth of fund-raises, 91 per cent of which were raised in the first two months, compared to $4.6 billion raised in the same period last year.

“Given that the curve of Covid-19 cases is yet to flatten decisively in some zones that account for a large part of the country’s economic activity, the virus will continue to remain a major headwind that both the government and private enterprises will need to tackle in the near future till such time that a definitive cure is found,” Soni added.

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