Decadal PE/VC investments cross USD 232 bn by 2020: Report

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March 19, 2021 6:24 PM

The domestic PE/VC industry is expected to grow materially going forward as large global limited partnerships increase their allocations towards the emerging markets in general and India in particular.

Deals grew larger and more complex and the share of large deals (above USD 100 million) rose from 40 per cent in 2011 to 80 per cent in 2020.Deals grew larger and more complex and the share of large deals (above USD 100 million) rose from 40 per cent in 2011 to 80 per cent in 2020.

The country has received USD 232.4 billion in private equity/venture capital investments during the decade ending 2020, with the alternate asset class growing 19 per cent each annually during the 10-year period, says a report.

The report by EY and Indian Venture Capital Association (IVCA), released on Friday, also said as much as 68 per cent of all PE/VC investments into the country over the past decade were in the past four years, aggregating USD 158.5 billion.

Also, as much as 44 per cent of the total investments were growth investments during 2011-20.

Financial services, infrastructure, real estate, e-commerce and technology were the most preferred sectors for investments, accounting for around 70 per cent of all PE/VC investments during the decade.

“The cumulative value of PE/VC investments during 2011-20 totalled USD 232.4 billion, which is more than twice the value recorded in the preceding decade,” the EY-IVCA report said.

IVCA Chairperson Renuka Ramnath said despite the challenges arising from the pandemic, the domestic PE/VC ecosystem has only become more resilient and better at finding newer opportunities bringing in much needed capital, becoming the single largest source of FDI.

During this past decade, the dollar value of domestic PE/VC investments grew from USD 8.4 billion in 2010 to USD 47.5 billion in 2020, an annual growth 19 per cent, she said.

PE/VC backed companies are bringing in new business models, creating new jobs, backing entrepreneurs and helping fund financial inclusion, better infrastructure, increase renewable energy and promote capital efficiency in the overall economy, she added.

Vivek Soni, a partner at EY, said in the decade to 2020 total PE/VC investments grew at 19 per cent each year aggregating to USD 232.4 billion and 68 per cent of it came in the past four years, when the inflow clipped annually at 31 per cent.

Only USD 58.2 billion of India-dedicated funds were raised between 2011 and 2020, which is around 25 per cent of the total PE/VC investments during the decade, he said.

While the decade was a mixed bag for PE/VC exits, the USD 17-billion Flipkart-Walmart deal was a turning point for the domestic PE/VC industry, especially the startup ecosystem.

The domestic PE/VC industry is expected to grow materially going forward as large global limited partnerships increase their allocations towards the emerging markets in general and India in particular.

Notwithstanding the sharp downturn in investment sentiment due to the pandemic, the decade ended on a record high of USD 47.6 billion in PE/VC investments in 2020, largely driven by Jio Platforms and Reliance Retail at USD 17.3 billion. Without these, the 2020 total would have been lower by 36 per cent.

Buyouts emerged as a key PE/VC investment strategy accounting for 23 per cent of all fund inflows during the decade at USD 54 billion, growing 11-fold between 2011 and 2020.

Deals grew larger and more complex and the share of large deals (above USD 100 million) rose from 40 per cent in 2011 to 80 per cent in 2020.

And so was the case with mega deals (above USD 500 million), with 45 mega deals in the past two years alone compared to 35 such deals in the preceding eight years combined.

The number of startup investments have grown more than three-fold from 159 in 2011 to 557 in 2020.

According to a recent Nasscom report, with 38 unicorns as of 2020, the country has the third largest number of unicorns globally after the US and China, even though a latest Credit Suisse report puts the number of unicorns at 100.

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