Companies
PE-VC deals activity set for record levels, internet businesses dominate
Summary
- Investors have inked 946 deals worth $26.9 billion already by July-end, and analysts expect the deals pipeline to stay intense for the rest of the year as well
Shrugging off pandemic blues, India’s private equity (PE) and venture capital (VC) ecosystem has had a busy year so far, with investors inking 946 deals worth $26.9 billion already by July-end.
With five months to go in 2021, dealmaking has reached nearly 80% of pre-covid levels, boosted by the growing dominance of internet-based businesses in this space. At this pace, the value of deals is set to reach record levels this year, shows a Mint analysis of VCCEdge data.
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Unlike a flurry of investments in Jio Platforms and Reliance Retail that dominated the PE-VC space in 2020, the resurgence of investment activity this year has been relatively more widespread. The top 10 deals, accounting for 40% of the total investments, include Flipkart’s $3.6-billion pre-IPO round and the $1.3-billion VC funding each in e-learning firm Byju’s and food delivery company Swiggy.
The deals pipeline is expected to stay intense for the rest of the year, as the capital supply is high globally and there are no signals of that changing in the next few quarters, said Madhukar Sinha, founding partner at India Quotient, a venture capital firm.
A detailed break-up shows growing prominence of VC funding, which increased from $8.9 billion in 2020 to $13.6 billion in 2021 so far. With this, the share of the VC segment almost doubled from 23% to 51%. The rest came from private equity investments ($5.1 billion), angel and seed capital ($633 million), pre-IPO, and public equity deals.
Altogether, companies managed to raise $194 billion through 10,652 such deals in the last six years, half of which has came from PE-VC investments since 2019.
Disruptions due to covid-19 have led to a rapid adoption of technology, causing a significant sectoral shift in deals activity. Investments in the internet businesses and IT space had a 51% share this year, up from 33% in 2019, followed by consumer goods (24%). Traditional manufacturing industries saw a decline from 17% in 2015 to just 3%.
The IT space may continue to attract investments, and the tech-related deals activity should increase in the short to medium term, said Sinha.
While the headline numbers confirm a resurgence and a revival in PE-VC interest, some possible downside risks do persist due to inflation and the US Federal Reserve’s taper talks, analysts said.
