Driven by buyouts worth $1.7 billion, private equity and venture capital (PE/VC) investments in India rebounded in July to $4.1 billion, while exits remained subdued.

The reporting month recorded 77 deals. Exits recorded $134 million across nine deals of which $108 million were through the open market, according to a report by the Indian Private Equity & Venture Capital Association and EY (IVCA-EY).

“While on a year-on-year basis, deal activity is still muted, in July at $3.7 billion, it saw an uptick into what has been the best month for PE/VC investments in 2020 (excluding the investments in Jio Platforms). Likewise, PE/VC fund-raising also recorded a sharp rebound in July with fund-raises worth $2.2 billion, 38 per cent higher than the total funds raised in H1 2020,” Vivek Soni, Partner and National Leader Private Equity Services at EY, said.

The uptick in PE/VC investments was supported by a pickup in buyout deals which recorded $1.7 billion in PE/VC investments with marquee funds buying controlling stakes in quality businesses at attractive valuations. From a sector perspective, technology sector led the pack, recording deals worth $963 million.

While the global and domestic economy is still not out of the woods yet, many sectors have started showing an uptick in activity under changed circumstances and altered modes of doing business. PE/VC fund managers also seem to be adjusting to the constantly evolving paradigm.

However, there continues to be a considerable overhang over economic activity, which is expected to remain below par and susceptible to headwinds like trade wars, geopolitical tensions, health of Indian banks and NBFCs, regional lockdowns and the curve of the virus case load in India, it said.

Investments

The PE/VC investments in July were 51 per cent lower compared with July 2019 and 41 per cent lower compared with June ($4.1 billion in July 2020 vs $8.4 billion in July 2019 and $6.8 billion in June 2020). The decline was due to fewer large deals across segments. Nonetheless, excluding the investments in Jio Platforms, July has been the best month so far this year, recording investments worth $3.7 billion.

The reporting month recorded 10 large deals (value greater than $100 million) worth $3.1 billion compared with 13 large deals worth $7.1 billion in July 2019. The largest deals in July include Thoma Bravo’s buyout of the US subsidiary of Majesco for $594 million, followed by KKR’s buyout of JB Chemicals and Pharmaceuticals for $496 million.

From a sector point of view, technology was the top sector in July with $963 million invested across 10 deals followed by financial services with $882 million invested across 15 deals and pharmaceuticals with $699 million invested across three deals. The infrastructure sector that was the top sector in July 2019 with $4.4 billion in investments recorded just two deals worth $15 million in July 2020.

Exits

The month recorded nine exits worth $134 million, 78 per cent lower than the value of exits in July 2019 ($616 million) and 76 per cent lower than the value recorded in June 2020 ($564 million). Open market exits in July were highest at $108 million across five deals followed by strategic exits with four small deals worth $26 million. There were no PE-backed IPOs and secondary exits in July.

The largest exit in July saw Warburg Pincus sell its 2.3 per cent stake in Au Small Finance Bank Ltd for $69 million.

Fund-raise

The reporting month recorded total fundraises of $2.2 billion compared to $545 million in July 2019. Fund-raising in July was 38 per cent higher than total funds raised in the first half of 2020. The largest fund-raise in July saw Sequoia Capital raise $1.4 billion for venture and growth capital investments in India and the region, the report said.

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