PE/VC firms' investments increase by 85% to $11.9 bn during Q1FY21

The value of investments in Q1FY21 was also over 58% higher compared to the immediate previous quarter (which saw $7.5 billion being invested across 231 deals)

Private Equity/Venture Capital firms have invested over $11.9 billion across 188 deals in the first three months of 2021, representing an increase of about 85 per cent compared to the same period in 2020. According to Venture Intelligence data, January to March 2020, the last pre-pandemic quarter, had recorded PE-VC investments of $6.5 billion across 238 deals.

The value of investments in Q1'21 was also over 58 per cent higher compared to the immediate previous quarter, which saw $7.5 billion being invested across 231 deals.

Deal volumes in the period, however, dipped 21 per cent compared to Q1'20 and was down 19 per cent compared to the previous quarter, the Venture Intelligence data showed.

Venture Intelligence said that the appetite for investing in high-scale technology start-ups gathered further momentum in the first quarter of 2021, led by the over $400 million rounds of investments attracted by three unicorns: Food delivery-focused Zomato, Edtech leader Byjus Classes, and e-sports company Dream11.

According to Venture Intelligence data, 18 PE investments during the first quarter of 2021 were worth $100 million or more (compared to 14 such deals in the year-ago period). Top investments during the period included two distressed asset deals in the financial sector: The $5.2 billion buyout of the Dewan Housing Finance or DHFL by Piramal Enterprises and the $380 million buyout of realty-focused Altico Capital by Hong Kong-based Ares SSG.

"The high level of fund flows during the latest quarter, coming as they did without any investments into Reliance Industries (RIL) Group companies, is very encouraging. It would be interesting to see how the investment figures in the coming quarters match up against the high bar set by RIL Group deals, which had dominated the last three quarters of 2020,” said Arun Natarajan, founder of Venture Intelligence.

He added that one of the interesting trends during the latest quarter was the replacement of Chinese investors from the “Cap tables” of Indian Unicorns (like Zomato) and other high-growth tech start-ups (like Fintech service KreditBee) via secondary transactions that also saw participation from domestic funds and family offices.

Led by the DHFL and Altico Capital deals, BFSI (Banking, Financial Services and Insurance) companies attracted $6.4 Billion (accounting for about 54% of the investment pie) during Q1’21. Among growth capital deals in the sector, non-banking finance company (NBFC) Five Star Business Finance attracted USD 234 million (from existing investors Sequoia Capital India and Norwest Venture Partners and new investors KKR and TVS Capita), while Magma HDI General Insurance, a joint venture between publicly-listed Magma Fincorp Ltd and Germany’s HDI Global attracted $72.4 million (from ICICI Venture, Morgan Stanley Private Equity Asia and three family offices).

IT & ITeS companies attracted $4.0 Billion led by Zomato ($500 M from existing investors including Bow Wave Capital Management, Steadview Capital, Dragoneer Investment Group and Tiger Global) and Dream11 ($400 M round led by new investors TCV, D1 Capital Partners and Falcon Edge). 

Education ($486 million; led Byjus Classes), healthcare & life sciences ($390 million; led by Stellis Biopharma) and shipping and logistics ($348 million; led by Adani Ports) were the next favourite destinations for PE-VC investors during Q1’21.

Eight successful domestic IPOs of PE-VC backed companies — from sectors as diverse as Online Gaming (Nazara Technologies) to manufacturing (Craftsman Automation and Indigo Paints) — along with the merger of Renew Power with a Nasdaq-listed SPAC (special purpose acquisition company) as well as a flurry of trade sales, kept exit activity also humming during Q1’21.

“With accelerated digital adoption running in parallel with massive global liquidity as well as the ongoing race to vaccinate amid a second wave of the pandemic, there is no shortage of excitement lined up. How some of these trends pan out is likely to shape the Indian private markets over the next few months,” said Natarajan.