PE/VC investment up by almost three times in November; driven by infra flow

PE/VC investments accounts 1.7-1.8% of GDP, almost at par with China and the global average

PE/VC investments in November 2019 grew almost three times to $4.8 billion from $1.8 billion in November 2018, boosted by robust flows in the infrastructure sector.

The investment was 50 per cent higher compared to October 2019 ($3.2 billion). Exits recorded $1.4 billion across 15 deals on the back of a pick-up in open market exits.

Total PE/VC investments in India, year-to-date, now stand at $44.2 billion, which is 18 per cent higher than the previous high of $37.4 billion recorded in the entire 2018, according to the IVCA-EY data.

In terms of volume, November 2019 recorded 38 per cent higher deals compared to November 2018 and 6 per cent higher compared to October 2019 (94 deals in November 2019 vs. 68 deals in November 2018 and 89 deals in October 2019).

Vivek Soni, partner and national leader for private equity services at EY, said November was a good month for PE/VC investments and he expects the year could end up at $48-50 billion mark for the year.

“This is a very significant figure, with PE/VC investments at 1.7-1.8% of GDP, we are almost at par with China and the global average for PE/VC investments to GDP ratio,” said Soni.

A significant part of the growth in 2019 has come from investment flow in the infrastructure sector (one-third of all investments in 2019).

Pure play PE/VC deals continue to progress at similar levels as last year, recording over $25.1 billion in investments. This segment could also pick up steam as the government embarks on its disinvestment agenda and many corporates offload stakes to raise capital.

The improved performance in November is on the back of higher number of large deals (value greater than $100 million). November 2019 recorded 12 large deals aggregating $3.8 billion compared to five large deals worth $950 million in November 2018 and five large deals worth $2.2 billion in October 2019. The largest deals announced in November 2019 include Alibaba Group and Softbank’s $1 billion investment in Paytm followed by $627 million investment in Zee Entertainment Enterprises Limited by a group of investors including GIC, Morgan Stanley and others and Unison Capital Partners’ buyout of Kyowa Pharmaceutical Industry Company Limited (Lupin’s Japan business) for $525 million from Lupin Limited.

From a sector point of view, financial services ($1.9 billion) was the top sector recording its highest value of investments since January 2018. November 2019 saw some new sectors entering the top league with life sciences sector (pharmaceuticals and healthcare) recording the second highest value of PE/VC investments in November at $1.2 billion, which is also the sector’s highest ever value of PE/VC investments in a month. Third in line was media and entertainment with $631 million.

Exits

While exits have been subdued for most of 2019 with year-to-date exits aggregating to $10.5 billion compared to $27 billion over the same period last year, activity has picked up slightly with the revival of deals in the open market on the back of improvement in capital market sentiment.

“While 2019 has emerged as the best year for PE/VC investments in India, uncertainties around global factors as well as slowing down of domestic growth could dampen the sentiment in the short-term,” said Soni.