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The private equity and venture capital (PE/VC) sector recorded investments worth $47.6 billion across 921 deals in 2020, almost at par with the previous year, led by fund-raising by Reliance Group entities. Exits stood at $6 billion across 151 deals with open market exits accounting for 40 per cent of all deals by value.
Had it not been for the PE investments of $17.3 billion in Reliance Group firms, the year under review would have been 36 per cent lower than 2019. In terms of volume, number of deals in 2020 declined by 11 per cent compared to last year (921 deals in 2020 Vs 1,030 deals in 2019), according to a report by Indian Private Equity & Venture Capital Association and EY.
Also read: India remains in a ‘sweet spot’ for continued FPI, PE flows in 2021: Anuj Kapoor
“PE/VC investment activity capped off a tumultuous 2020 on a high, closing out with over $7.1 billion of investments in December, making it the second-highest monthly total in 2020. While the Jio Platforms’ and Reliance Retail’s fund-raising juggernaut rolled on in May-June and September-November respectively, seemingly unaffected by the pandemic, Indian PE-VC investment activity ground to monthly average of less than $1.2 billion during March-June, the lowest ever in the past six years,” Vivek Soni, Partner and National Leader Private Equity Services at EY, said.
“July saw almost $4.1 billion of PE/VC investments (non-RIL entities) and as India continued to fare better than expected on both health and economic parameters, monthly PE/VC investment activity strengthened month-on-month,” he added.
Large deals (greater than $100 million) fell from 109 in 2019 to 66 (excluding RIL Group deals) largely due to the tepid deal-making for one-third of the year.
Infra sector hit
Consequently, while most sectors, barring the ones mentioned above witnessed declines in PE/VC investments, infrastructure sector investments declined the most, from $13.8 billion in 2019 to $5 billion in 2020. PE/VC exits too saw a significant decline of 46 per cent from 2019 levels, reaching a five-year low as pandemic induced lockdowns and the resulting disruptions roiled asset prices, forcing PE/VC investors to postpone stake sales to better times.
One of the biggest reasons for the relative decline in PE/VC investments in 2020 is the under-performance of the infrastructure and real estate sectors, which attracted the highest PE/VC investment in 2019, at $20 billion, accounting for 42 per cent of all PE/VC investments in 2019. In 2020, these sectors have received only $10.2 billion in investments, accounting for just 21 per cent of total PE/VC investments.
As a result, there has been a sharp decline in buyout activity as well, which has recorded a decline of 28 per cent in terms of value and 30 per cent in terms of volume. Infrastructure and real estate sectors accounted for 71 per cent of all buyouts by value in 2019 which has dropped to 61 per cent in 2020.
Exits
In 2020, exits fell by 46 per cent in value terms ($6 billion vs $11.1 billion in 2019) and is the lowest value in six years. In terms of volume, exits declined by 4 per cent compared to 2019 (151 deals in 2020 vs 157 deals in 2019). The decline was mainly due to fewer large deals.
Exits via open market were the highest at $2.4 billion (67 deals) in 2020, 47 per cent fell compared to 2019. Exits via initial public offerings (IPOs) were second in line with $1.2 billion recorded across nine IPOs ($247 million across eight IPOs in 2019), which includes the $1 billion SBI Cards partial exit by Carlyle.
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