Deal activity by private venture investors surges 28pc to USD 48 bn in 2019

Propelled by infrastructure bets, deal activity by private venture investors grew by 28 per cent to USD 48 billion in 2019 but will slow down to under 20 per cent in 2020, a report said on Thursday.

Infrastructure investments by private equity and venture capital funds accounted for USD 14.5 billion during the year, which is higher than the play in seven years combined, the data by consultancy firm EY showed.

The surge in deal making to record highs comes at a time when economic growth is plummeting to new lows every quarter, leaving policymakers concerned.

In what can be construed as a worrisome picture, growth capital investments grew by a modest 9 per cent to USD 14.5 billion, which was helped by the infra sector, it said, adding pure play PE/VCs' growth capital investments declined 26 per cent in terms of value and 13 per cent by volumes.

"While our outlook for 2020 is positive, we expect investment growth to slow down to about 15-20 per cent in 2020," its partner Vivek Soni said in a statement. He added that there is USD 50 billion of dry powder waiting to be invested.

The total investments are 1.7 per cent of the Indian GDP, which is the same level as the one observed in China in 2018, the statement said.

From a deal making perspective, the USD 16.2 billion in buyouts for a majority stake witnessed in 2019 made the segment emerge as the leader, it said.

Start-up investments at USD 7.9 billion were the highest ever, it said, adding that such transactions constituted for a majority 610 of the 1,037 deals in 2019.

From an exit perspective, there were 156 deals in which investors took cheques of USD 11.5 billion.

Soni said there is a huge stock of small and mid-cap companies built over the last 18 months which are waiting for exits but did not sound very optimistic of the IPO activity.

Private investments in public equity (PIPE) deals, wherein the PE/VCs invest in listed companies, increased 40 per cent to USD 5.3 billion, while the credit investments were up 20 per cent at USD 3 billion, it said.

Infrastructure investments were up 225 per cent over the year-ago period, while real estate were up 33 per cent to USD 6.1 billion, it said, adding that pure-playPE/VC investments declined 3 per cent. The largest deal during the year were led by Brookfield, including the USD 3.7 billion buyout of Reliance Jio's towers arm and Reliance Industries' east-west pipeline for USD 1.9 billion, it said.