Private Equity/ Venture Capital investments in October 2020 stood at $8.4 billion as compared to $3.2 billion in October 2019, up by 163 per cent. In terms of deal value, October 2020 has been the best month ever for PE/VC investments. The significant jump in PE/VC investments was primarily on account of investments worth $3.3 billion made in Reliance Retail Ventures and investments in commercial real estate projects worth $3.6 billion announced by Blackstone and Brookfield.
According to the IVCA-EY report, October 2020 recorded nine large deals (value greater than $100 million) worth $7.6 billion compared to five large deals worth $2.2 billion in October 2019 and seven large deals worth $3.4 billion in September 2020.
The largest deals in October 2020 saw Brookfield acquire 12.5 million square feet of commercial space from RMZ Corp including its shared working space COWrks followed by Blackstone buying the rental income assets of Prestige Group for $1.6 billion. In addition, Reliance Retail Ventures received five large investments from a group of PE investors aggregating $3.3 billion.
Vivek Soni, Partner and National Leader Private Equity Services, EY said, October 2020 has been the best month so far with PE/VC investments exceeding $8.4 billion. This spike is primarily due to a couple of large $1 billion plus deals in the commercial real estate sector and the continuing inflow of PE investments into entities of the Reliance Group ($3.3 billion received by Reliance Retail Ventures in October 2020).
Year to date, 2020 has recorded $37.5 billion in PE/VC investments, just 5% below the numbers recorded last year for the same period. However, investments in Reliance Group entities account for 40% of these investments. Excluding this outlier, YTD PE/VC investments are 43% lower than the same period, last year.
From a sector point of view, real estate has emerged as the top sector with US$3.7 billion in investments across six deals, accounting for 44% of all investments in October 2020 and greater than investments received by the sector in the past 14 months combined on account of the two large deals mentioned above. Retail and consumer products was next in line with US$3.3 billion invested across seven deals followed by pharmaceuticals with US$706 million invested across four deals and financial services with US$297 million invested across 11 deals.
Exit activity continued to remain muted with October 2020 recording US$288 million in exits, mainly supported by deal activity in the open market segment. If the recovery in the capital markets becomes broader and mid-cap / small indices inch further upwards, we can expect to see a pickup in PE-backed IPOs and open market exit of PE positions in listed companies.
While the domestic economy has seen demand picking up to pre-Covid levels in some sectors helped by the festive season and pent-up demand, we are still not out of the woods as yet. Notwithstanding the investor thumbs up to the US election results, there are still concerns on global growth outlook especially with countries in the European region going into second round of lockdowns.
"We expect Indian PE/VC investing activity to remain circumspect and overweight towards larger transactions involving high quality assets in select sectorsm” said Soni.
In October 2020, buyouts was the largest deal segment with $4.4 billion recorded across eight deals (US$500 million across five deals in October 2019) mainly on account of the two large deals in the commercial real estate space noted above. Growth investments recorded $3.6 billion across 13 deals ($1.7 billion in October 2019). Start-ups recorded $318 million in investments across 58 deals ($655 million across 61 deals in October 2019).