PE/VC investments drop by 35% in January to $1.6 bn: EY-IVCA data

January 2021 recorded three large deals worth $680 mn compared to five large deals worth $1.4 bn in January 2019 and 12 large deals worth $6 bn in December 2020

PE/VC investments in January 2021 reported a 35 per cent drop to $1.6 billion from $2.5 billion, a year ago. The number of deals reported also remained flat at 80, according to EY-IVCA data. The decline in investment was primarily on account of fewer large deals. 

January 2021 recorded three large deals (value greater than $100 million) worth $680 million compared to five large deals worth $1.4 billion in January 2019 and 12 large deals worth $6 billion in December 2020.

The largest deals in January 2021 saw a group of investors including Tencent, Lightspeed, Altimeter Capital invest $280 million in Udaan.com, an online B2B trading platform, followed by Tiger Global, Steadview, Fidelity and others investing $250 million in Zomato, a platform for online food ordering and delivery.

In January 2021, growth investments were the largest deal segment with $717 million recorded across 17 deals ($1 billion across 14 deals in January 2019).

Start-up investments recorded $599 million across 52 deals ($449 million across 50 deals in January 2019). Buyouts recorded $150 million in investments in one deal ($71 million across three deals in January 2019).

From a sector point of view, e-commerce emerged as the top sector with $689 million in investments across 15 deals, accounting for 43 per cent of all investments in January 2021 and second highest value of monthly investments in the sector in past 18 months. E-commerce has emerged as the top sector after a gap of over two years. Infrastructure was next in line with $177 million invested across four deals followed by financial services with $176 million invested across 15 deals and pharmaceuticals with $111 million invested across three deals, shows EY-IVCA monthly tracker.

Vivek Soni, partner and national leader, Private Equity Services at EY noted that for the first time in over two years e-commerce emerged as the top sector recording investments worth $689 million.

Exit activity continued to remain muted with January 2021 recording $313 million in exits, mainly supported by IPO deal activity. January recorded three PE-backed IPOs that saw early investors like Sequoia, True North, and Bessemer record successful partial/full exits. In the absence of strategic and secondary deals, IPO’s in the currently buoyant midcap/ small cap equity markets have provided a good exit option to PE/VC investors at favourable valuations. 

“If this recovery in the capital markets sustains and mid-cap / small cap indices inch further upwards, we expect to see a pickup in PE-backed IPOs and open market exit of PE positions in listed companies,” he said.

Looking ahead, the deal pipeline remains robust and investment teams of most large and medium sized PE funds are working flat out diligencing and negotiating multiple deals. In our view, the global macro has thrust the India investment opportunity in a favourable position and most PE/VC investors are inclined towards investing increased amounts in larger deals. While there are still concerns on the possibility of a second wave, new mutant virus strains and the complexity of the vaccine rollout, most Indian corporates as well as investors seem to have a positive view.  The government too has played its part well by way of an accommodative Budget that is expected to spur growth on the back of increased Government spend and kickstart of the capex cycle, said Soni

“Notwithstanding the slow start to PE/VC investments in January, we expect things to pick up and retain our ‘bullish’ outlook for 2021 for both PE/VC investments as well as exits,” he said

Exits

January 2021 recorded 9 exits worth $313 million, 32% lower than the value of exits in January 2019 ($461 million) and 70% lower than the value recorded in December 2020 ($1 billion). IPO exits in January 2021 were highest at $165 million across three deals. The largest exit in January 2021 saw Sequoia sell partial stake (8.8%) in Indigo Paints for $87 million, shows EY-IVCA data.

Fundraising

January 2021 recorded total fundraising of $854 million compared to $742 million raised in January 2019. The largest fundraise in January 2021 saw Godrej Fund Management raise $250 million in the first tranche of its $500 million fund to develop prime office buildings.