Covid-19 impact: IPO slump stonewalls private equity exits in H1 2020

The value of private equity (PE) exits in the first half of the calendar year 2020 dropped to $1.9 billion, a 47 per cent decline over the same period last year and a 69 per cent fall compared with H2 2019. Market volatility and the decline in the number of initial public offerings (IPO) following the Covid-19 pandemic were the chief reasons for the dip in exits. Public market sales accounted for 80 per cent of the exit value in H1 2020, mainly due to SBI Cards’ $1.4 billion IPO.

“A number of companies have postponed their IPO plans, consequently placing a number of PE exits on hold. Exit activity levels may remain muted this year until there is some form of recovery in asset prices. The need for liquidity could drive some amount of secondary sales and consolidation could also spur strategic sales. However, we could expect some conflict between buyers and sellers on the valuations front," observed a note by PwC India. In the past few years, the bulk of the IPO proceeds have been on account of secondary share sales, mainly from PE investors. Industry players said many IPOs which are in the pipeline currently, too, have a higher number of PE exits.