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PE investments, exits likely to be deferred as virus plays spoilsport

PE investments in India in the January-March quarter fell 36% year-on-year to $5.9 bn, shows a deal tracker

The disruption caused by covid-19 is expected to freeze private equity investments and exits, as investors focus on existing investments. According to private equity deal tracker Venture Intelligence, PE investments in India in the January-March quarter fell 36% year-on-year to $5.9 billion.

“Deal flow has slowed down materially, but there are old deals that we continue to evaluate. There are a few things in the pipeline that we are working on and we are trying to see how much progress one can make remotely," said Vishal Nevatia, managing partner of PE firm True North.

The attention, meanwhile, is on helping portfolio companies survive the storm. “One of our priorities right now is to make sure that our partner companies prepare well and can survive if the lockdown continues. We are also doing stress tests to see how much additional equity capital we should keep ready for our partner companies in case the lockdown prolongs," Nevatia said.

“This crisis will pass. Well-managed and well-capitalized businesses will have an opportunity to grow both organically and inorganically once things settle down," he added.

While new investments are expected to slow down over the next few months, exits too are going to be tough amid falling valuations.

“In 2020, exit activity is expected to see a significant slowdown till there is a recovery in asset prices and economic activity," said Vivek Soni, partner and national leader, private equity services, EY.

According to data from EY, in 2019, PE and VC exits added up to $11.1 billion, with open market sales contributing the biggest chunk of exits at $4.6 billion.

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