India-focused PE/VC funds create record by raising $11.7 billion in 2019

Amount beat the previous record of $8.1 bn raised in 2018

The economy might be slowing, but India-focused private equity (PE) and venture capital (VC) funds created a record by raising $11.7 billion in 2019 in 56 funding rounds, an increase of around 45 per cent compared to the previous year, according to an analysis by Ernst & Young based on data from VCCEdge.

The previous record of $8.1 billion in 51 fund-raising exercises was in 2018.  The total amount of funds, with the addition of announcement of intentions during the calendar year that did not result in fund-raise, of Indian-focused PEs and VCs was pegged at $30 billion, which is more or less similar to 2018.

The largest such exercise during the year saw the Government of India sponsor a $1.5-billion special window for providing last-mile funding to stalled real estate projects.  The second largest player was Edelweiss’s alternative investment arm, which raised $1.29 billion to invest in stressed assets.

Kotak Special Situations Fund raised $1 billion for non-performing assets, ChysCapital got $850 million, while India Resurgence Fund raised $750 million for structured debt, amongst others.

Says a top executive of a leading PE firm: “The reason is simple. Global investors in PE funds have seen return in multiples of 2.5-3 times in India in funds that are four- to five-years-old. With stability in substantial upside in exits they are willing to invest more into India focused funds or those with a substantial India presence”.

This does not include Asian funds raised by global PEs looking at earmarking anything between 20-30 per cent of their cash into India say key global PE players. They say the top 10 global PE funds have raised around $50 billion in Asian funds, which are for classic equity (others are raising VCs and for infrastructure projects of similar amounts).

They project that every year about $40-50 billion is available through these funds for investing in India. A global PE fund’s managing director says, with China having a strong domestic lead PE players market, many Asian funds that are raising huge sums have to look at India, which is a key market.

“The economy might be slowing down, but that offers opportunities for buy-outs at a lower price as well as more companies looking for funds. We currently look at offers from as many as 200 Indian companies, which is a new high, though we only narrow it down to 20-30 of them,” said the MD. 

Sovereign and pension funds are also pushing more aggressively in the country. This is reflected in the fact that they put in $10.9 billion last year, again a record. This constituted 23 per cent of total PE and VC investments in 2019 says Ernst & Young.