Report

India Private Equity Report 2021

India Private Equity Report 2021

Despite the pandemic, India’s Private Equity industry sustained its momentum.

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India Private Equity Report 2021
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2020 was a momentous year, with Covid-19 upending some forecasts and trends whilst reinforcing and accelerating others. The economic impact of the coronavirus pandemic in India has been significant, causing GDP contraction of more than 10% and leading to the highest-ever annual fiscal deficit at 9.5% for fiscal year 2021. Imposition of a nationwide lockdown in late March 2020 halted over 65% of the Indian economy and led to the loss of more than 4 million jobs in the formal sector.

  • Written in collaboration with IVCA

However, things have turned a corner in 2021, with unprecedented stock market gains on the back of sooner-than-expected business recovery, strong foreign institutional investor (FII) inflows, and Covid-19 vaccine approval and administration. The latest forecasts by the IMF expect strong rebound in 2021, with growth returning to the long-term trend of 7%–8% from 2022 to 2025.

Despite Covid-19, we have seen a few investment themes continue from prior years. Strong deal volume flow continued with a 5% year-over-year (YOY) increase despite a slowdown in the total value of investments (excluding Jio Platforms and Reliance Retail deals). Growth equity momentum was sustained with $10 billion in investments, more than in all previous years and nearly at par with 2019. From a sector standpoint, strong momentum continued in consumer tech and IT/IT-enabled services (ITES). Additionally, India-focused dry powder remained resilient at $8 billion, with the share of oversubscribed and at-target funds increasing further.

At the same time, new themes emerged in 2020. There was a moderation in cheque sizes as average deal size declined by 25% compared with 2019. In terms of sector activity, healthcare witnessed a surge with big-ticket deals in pharmaceuticals manufacturing and distribution and active pharmaceutical ingredient (API) development. However, banking, financial services, and insurance (BFSI) investment value fell by 60% due to uncertainty over nonperforming assets (NPAs), the Reserve Bank of India (RBI)-imposed bank moratorium, and the impact of Covid-19 on lending. From an exit perspective, multiples rose by 1.4 times even as exit value dipped by 30% in 2020 vs. 2019.

In 2020, the Indian Private Equity (PE) Landscape witnessed strong investment momentum with $62 billion in deal value and 40% from Jio Platforms and Reliance Retail deals. Investment activity was muted from March to May due to Covid-19-led uncertainty, but it recovered strongly in H2 to pre–Covid-19 levels with late-stage and buyout deals witnessing increased traction. The pandemic also led to a shift in the type of deals made, with investors focusing on alternate investment strategies such as distressed opportunistic sales and qualified institutional placements (QIPs).

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