During Q2FY20, funds raised by PE/VCs for investment in India were lower by 11.5 per cent at around $2.3 billion as compared to corresponding period last year. On a year-on-year (y-o-y) basis, exits declined by 78 per cent in terms of value in Q2FY20 ($3.9 billion against $18 billion in same period last year).
According to EY data, the largest fund raise during the period was carried out by Kotak Special Situations Fund, which raised $1 billion for investment into stressed assets.
New fund raising plans announced in Q2FY20 stood at $2.7 billion compared to $3.7 billion in Q2FY20.
Q2FY20 witnessed the large $16 billion Flipkart-Walmart deal. If this deal is excluded, exits during Q2FY20 were almost twice the value recorded in Q2FY18.
However, compared to Q1FY20 ($2.9 billion), exits increased by 34% in Q2FY20, mainly due to OYO founder’s move to partially buyback stake worth $1.5 billion held by Lightspeed and Sequoia, which was also the largest exit in Q2FY20. In addition to this, OYO's founder also made a primary infusion of $500 million in OYO.
Exits via buyback were also the highest at $1.7 billion due to this buyback. Exits via secondary sale (sale to other PE funds) recorded $1.2 billion (10 deals) in Q2FY20, 7 per cent higher in terms of value compared to Q2FY18. Exits via open market recorded $792 million (10 deals) in Q2FY20, 23% higher compared to the value recorded in Q2FY19. Exits via strategic sale recorded $160 million (6 deals) in Q2FY20, 99% lower than the value recorded in Q2FY19 which had recorded the large Flipkart-Walmart deal.
There was one PE-backed IPO during the third quarter ended September, 2019, which saw Kedaara Capital, Helion Venture Partners and Valiant Capital sell their stake worth $88 million in Spandana Sphoorty Financial Limited.
From a sector perspective, e-commerce recorded the highest value of exits in Q2FY20 ($1.5 billion across three deals), followed by financial services ($726 million across five deals) and healthcare ($438 million across two deals).
Exits have not had the same momentum as seen in 2018. In 2019, year-to-date PE/VC exits total $8.1 billion vs $8.5 billion for the same period last year (excluding the mega $16 billion Flipkart deal). Nonetheless, at $3.9 billion, Q2FY20 has been the best quarter so far for exits helped by the large $1.5 billion partial buyback by OYO’s founder from the company's early stage investors, said Vivek Soni, Partner and National Leader Private Equity Services, EY.
The government’s step to rationalise the corporate tax rate and introduce positive changes to the FPI policy are steps in the right direction, and increase the attractiveness of India for long-term capital investment relative to it's emerging markets peers. "In our view, notwithstanding headwinds like volatile oil prices, global trade relationships between the US and China, and stress in India’s credit ecosystem, Indian PE/VC industry continues to make sizeable commitments and India appears to be on track to develop into one of the large PE/VC markets globally,” Soni added.