Value of large deals fell to a 19-month low, with five large deals worth $700 million in Feb
The decline in value was mainly due to fewer large deals happening in the country
Private equity (PE) and venture capital (VC) investments into India have suffered a setback, as concerns over the fast-spreading Covid-19 pandemic turn dealmaking into a tough affair for investors.
In February, PE/VC investments recorded a 24-month low of $1.7 billion, 32% lower compared to January and 39% lower than $2.8 billion recorded in February 2019, according to a report by the Indian Private Equity and Venture Capital Association and consulting firm EY.
The decline in value was mainly due to fewer large deals (value greater than $100 million) happening in the country, the report said.
The value of large deals fell to a 19-month low, with five large deals worth $700 million in February, compared to five deals worth 1.4 billion in January and nine deals worth $2 billion in February last year. The largest deal announced in February saw General Atlantic invest $200 million in edtech firm Byju’s, followed by Warburg Pincus’ investment of $150 million in Apollo Tyres Ltd.
“Uncertainty over the impact of Covid-19 is expected to act as a significant headwind to Indian PE/VC investments. The rapid global spread of the pandemic over the past 30-45 days has spiked business risk premiums, which has already led to a significant downward correction in capital markets around the world, bringing high volatility to the home markets of global/regional GPs and sovereign wealth funds/pension funds that have been making over $100 million investments in India," said Vivek Soni, partner and national leader - private equity services at EY.
“Further, travel restrictions and the inability of people to meet face-to-face is expected to delay work-in-progress deals and limit the number of new deals from being struck," he added.
Growth capital deals, highest in value in February at $677 million invested across 15 deals, were 55% lower on a year-on-year basis. This was followed by startup investments worth $562 million across 44 deals, 3.6 times higher than $154 million invested in February last year. Buyouts recorded investments worth $209 million across three deals compared to $187 million across two deals in February 2019.
In terms of sectors, the education sector emerged as the top sector for the first time due to the large investment in Byju’s. The education sector saw investments worth $311 million across five deals, followed by technology which got $271 million across 18 deals, and real estate with $232 million invested across three deals. Financial services, which has traditionally been one of the top sectors, was relegated to the fifth place with $162 million invested across nine deals. Exits also slowed down in February 2020 to 15 exits worth $321 million, 30% lower than January and 32% lower than the $472 million a year ago. The largest exit in February saw Baring India Private Equity sell its 4.9% stake in Manappuram Finance Ltd for $101 million.
Financial services sector, at $305 million across six deals, was the top sector for exits in February, accounting for 95% of all exits by value.