PE/VC investments touch all-time high of $9.5 bn in July: Report

Investments by private equity and venture capital funds doubled to a record high of USD 9.5 billion in July mainly driven by higher investor interest in the e-commerce sector, a report said on Monday.

Private equity (PE) and venture capital (VC) investments stood at USD 4.1 billion in the year-ago period.

The activity was higher by 77 per cent when compared to June's USD 5.4 billion, the report on monthly PE/VC investment activity by industry lobby IVCA and consultancy firm EY said.

The month recorded 19 large deals of over USD 100 million aggregating to USD 8.2 billion, compared to 10 large deals worth USD 3.1 billion in the year-ago period and 12 worth USD 3.6 billion in June 2021.

July 2021 was also a record in volume terms, as 131 transactions were announced, compared to 77 in the same month last year and 110 in June 2021.

Pure-play investments, excluding those in real estate and infrastructure, accounted for 96 per cent of all PE/VC investments in July 2021 at USD 9.1 billion, almost twice the value recorded in July 2020 (USD 3.8 billion) and June 2021 (USD 4.4 billion), the report said.

The e-commerce sector accounted for USD 5.8 billion of PE/VC investments, bringing the e-commerce total PE/VC investments year-to-date in 2021 to USD 10.5 billion, more than double the previous annual high.

"The positive response of the equity markets to the Zomato IPO has acted as a catalyst and almost all the leading e-commerce companies are now shoring up capital from investors (who are keen) and are making bolt-on acquisitions to bulk-up prior to hitting the capital markets," EY's partner Vivek Soni said.

Important enabling reforms like the performance-linked incentive (PLI) scheme and scrapping of the retrospective tax law will further strengthen investor sentiment, he said.

However, he cautioned that the downside risks include a possible pandemic resurgence, a potential spike in commodity prices especially oil, inflation and any hawkish action by the US Federal Reserve.

From 'exits' perspective, July recorded 22 deals worth USD 965 million which is much higher than the USD 134 million in July 2020, but 70 per cent lower compared to the preceding June's USD 3.2 billion, it said.

In terms of fund raising, there was a massive decline in July 2021, as only USD 226 million has been raised for future investments, as against USD 2.2 billion in July 2020.