VC the most outstanding asset class for India in 2021: IVCA-Preqin

India's total AUM at $61bn as of 15, December 2020, with $15bn of dry powder as of end of Sept 2021

Despite the Covid-19 outbreak in 2020, India's private equity and venture capital (PE-VC) industry remained resilient. VC is arguably the most outstanding asset class this year for India, said an IVCA-Preqin Factsheet, launched as a part of Indian Private Equity and Venture Capital Association’s (IVCA) first edition of the Maximum India Conclave (MIC).

Private equity represents the largest segment of Indian alternative assets with assets under management (AUM) of $31 billion, up by 2.3 per cent from a year ago, whereas venture capital achieved an aggregate deal value of $26 billion to date, which is more than double of last year.

"India absorbed $123 billion dollars in the last two years vis a vis $200 billion in the last 5 years, annually this is about 1.8 per cent of our current GDP. With the coming of age of the alternative investment we expect the Alternative Asset penetration to GDP to go to at least a 3 per cent if not a 5 per cent,” said Renuka Ramnath, Chairperson, IVCA & Founder, MD and CEO, Multiples Alternate Asset Management.

She added that India’s absorptive capacity can go up from $500 billion to $750 billion in the next 5 years. “The exit options for investors have vastly improved over the past 5 years with a strong velocity in the PE to PE transactions, strategic exits and appetite for IPOs in the domestic and international markets,” said she.

Indian PE-VC funds have had impressive exits this year, supported by buoyant capital markets. From January to August 2021, cumulative exits by PE-VC funds reached a record $31 billion.

A dozen PE-VC-funded companies have filed for IPOs, which are expected to hit the market in Q4 2021. Indian private capital markets will see robust earnings and successful IPOs of tech companies in 2022.

Ee Fai, Preqin’s SVP, Head of Research & Data Operations said, "India PE-VC has proved itself to be resilient in the face of the pandemic, squeezing in a 2.1 per centincrease in AUM in 2020. Although fundraising slowed last year, it has risen dramatically this year together with deals and exits. Preqin understands from investors that more international LPs are prioritizing India as a key emerging market, a trend helped by a climate of uncertainty elsewhere in the Asia-Pacific region."

In 2020, private equity-backed buyouts in India totaled a record $19 billion, up 162 per centfrom the previous year. In the venture capital space, total deal value stands at $26 billion in 2021 to date, already more than double last year’s $11 billion. The number of venture capital deals completed may be dropping off, but their size is increasing. India is producing an increasing number of unicorns and decacorns including technology-led accommodation provider Oravel and e-commerce giant FlipKart. India is well on its way to receiving $30 billion worth of VC investments from domestic and global investors in 2021.