Price correction due to covid-19 will create opportunities: report
The current macro environment is a challenging one, but quality deals will attract investors, says Bain and CoAround 81% investors see SaaS as a major investment area within the tech space in the next three to five years
PremiumMUMBAI : Covid-19 has disrupted private equity (PE) deals, but the resulting price corrections will present new investment opportunities in the second half of the year, said a report by consulting firm Bain and Co.
“While we will likely see a reduction in investments in H1 2020, it will be accompanied by price correction across the board. Based on the global financial crisis experience, deals invested during or after a downturn tend to do well," said the India Private Equity Report 2020.
India continued to be the second largest PE deal market in Asia-Pacific in 2019, with the maximum growth in the region. It drew investments of $45 billion from 1,053 deals during the year, the highest in the last decade, the report added.
The investment value was about 70% higher than 2018, and nearly 110% higher than the previous five-year average.
The current macro environment is a challenging one, but quality deals will attract investors, said Bain. “In the Indian context, dry powder decreased to 2016 levels, at $8.3 billion in 2019. While this is lower than the levels witnessed in the previous two years, there is sufficient capital for high-quality deals," it said. The disruptions caused by covid-19 are likely to lead to growth in select pockets, making them more attractive for investors, it added.
Drawing from the outcomes of the lockdown in China, which has resulted in long-lasting consumer behavioural changes, including increased time spent on activities, such as digital productivity and digital leisure, Bain said in India, too, a few sectors could benefit from the behavioural changes and increase in user bases.
These could include digital entertainment, fresh e-commerce, telemedicine, remote work and remote study.
“The market disruption caused by covid-19 could lead to a growth in select pockets such as e-commerce, enterprise technology, SaaS, healthcare and on-demand services," said Arpan Sheth, partner, Bain and Co.
Around 81% investors see SaaS as a major investment area within the technology space for the next three-five years, while 67% see cross-sector technology plays, such as fintech, as a growing investment destination, according to a Bain survey. “The India SaaS market is forecast to grow from about $6 billion in 2019 to more than $20 billion in 2022. The investment value in SaaS rose to $1.3 billion, a 60% increase over last year’s $840 million," it said.
Fintech was the largest cross-sector tech segment in India in 2019, both in terms of deal value at $2.4 billion and deal volume at 83.
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
