PE/VC investments decline 10% y-o-y in first half of 2020: Report

Private Equity (PE) investments in the first half of the year dropped by 10 per cent in value terms to $18.3 billion, from $20.4 billion in the first half of 2019.

Deals worth $9.6 billion in Jio Platforms accounted for 52 per cent of all PE/VC investments in 1H20. If Jio Platforms deals are excluded, investments in the first half of 2020 would be significantly lower at $8.7 billion.

The number of deals in 1H20 declined by 11 per cent and 19 per cent, compared to 1H19 and 2H19 respectively (433 deals in 1H20 vs. 499 deals in 1H19 and 533 deals in 2H19), according to the IVCA-EY monthly PE/VC roundup. The first half had investments worth $18.3 billion across 443 deals, on the back of $9.6 billion invested in Jio Platforms by a group of PE/VC funds, said a report by IVCA-EY.

“First half of 2020 and more specifically the second quarter of 2020 has (sic) been a very challenging time for both corporate India and investors alike. Because of Covid-19, both sides have had to deal with their own set of uncertainties, some of which are expected to persist,” said Vivek Soni, Partner and National Leader Private Equity Services at EY India, referring to disease caused in the coronavirus pandemic.

Investments, like in Jio Platforms, are rare and they are unlikely to be repeated. PE/VC investments in the second quarter (ex-Jio Platform deals) closed at $3.7 billion, 27 per cent lower than first quarter of 2020. “If we keep the Jio Platform deals aside, 2Q20 would have been the lowest since the past 15 quarters for PE/VC investment activity,” said Soni.

Services and essential goods sectors, like pharma, telecom, digital technology, or education technology, got a major chunk of investments and favourites last year, like infrastructure, real estate and financial services, witnessed significant decline.

A major reason for the decline in PE/VC investments during the first half has been the underperformance of the infrastructure and real estate sectors, which accounted for 42 deals of deals last year.

In the first half of 2020, these sectors received only $1.9 billion in investments, accounting for just 11% of total PE/VC investments.

1H20 recorded 28 large deals aggregating to $13.3 billion compared to 47 large deals aggregating to $14.1 billion in 1H19 and 62 large deals aggregating $20.4 billion in 2H19. Nine out of the 28 large deals were on account of investments in Jio Platforms (nine deals worth $9.6 billion). In addition to the investments in Jio Platforms, the other large deals in 1H20 include Carlyle’s $490 million investment in Piramal Pharma for a 20% stake and its buyout of 74% stake in SeQuent Scientific Limited for $210 million.

From a sector point of view, in 1H20, almost all sectors recorded sharp decline in value invested. Telecom and life sciences were the only sectors to record an increase in investments. Telecom was the top sector with $9.7 billion invested across 11 deals (10 times increase y-o-y) followed by financial services with US$1.8 billion invested across 74 deals (53% decline y-o-y) and life sciences with $1.5 billion invested across 43 deals (60% increase y-o-y). Infrastructure sector that received the highest value of investments in 1H19 received $1.6 billion across 17 deals (71% decline y-o-y).