- At US$3.6 billion, investments recorded 33% decline y-o-y in May 2021
- Growth investments were the highest at US$2 billion in May 2021
- Cumulative value of exits in 2021, at US$19.3 billion, is more than 3 times the value recorded in 2020
Mumbai, 14 June 2021: According to the IVCA-EY monthly PE/VC roundup, May 2021 recorded investments worth US$3.6 billion across 60 deals, on the back of nine large deals worth US$2.7 billion. Exits recorded US$12 billion across 18 deals, with three strategic exits worth US$10.4 billion.
Vivek Soni, Partner and National Leader Private Equity Services, EY said, “May 2021 recorded PE/VC investments of US$3.6 billion, significantly lower than levels seen in April 21 (US$7.5 billion) and March 21 (US$5.4 billion). Notwithstanding this dip in May 2021, on a YTD basis, PE/VC investment trends remain bullish. In the first five months of 2021, PE/VC investments have surpassed US$20 billion, almost twice the value recorded in the same period last year. It is clear that PE/VC investors are now able to price in COVID-19 associated risks better than they were in April / May 2020. This revival in PE/VC investments has been driven by a record increase in investment value in ‘COVID resilient’ sectors like e-commerce (US$4.3 billion) , technology (US$3.8 billion), pharma (US$1.4 billion), media and entertainment (US$1.2 billion), education (US$885 million), healthcare (US$801 million) as well as a revival of PE/VC investments in financial services (US$3.1 billion). We expect this ‘polarisation’ of investments to continue till the outlook on pandemic related lockdowns and disruptions changes materially.
PE/VC exits too have picked up momentum in 2021 with May 2021 recording the second-best month ever with exits worth US$12 billion. As a result, 2021 has emerged as the second-best year for PE/VC exits after 2018 with exits worth US$19.3 billion in the first five months. This is more than three times the total exit value recorded last year. Strategic exits have been the biggest driver of this rise, recording US$12.7 billion so far as large well-funded corporates are taking advantage of the current environment to consolidate businesses/and or acquire online capabilities to enhance the value proposition of their existing brick and mortar businesses. We expect capital markets driven exits to increase meaningfully as a number of Indian ‘unicorns’ follow up on their IPO plans. Equity markets reaction to these maiden listings will be a bell weather event for the Indian start-up eco-system and could potentially fire up more investments as well as exit activity in 2021 and 2022.
As COVID infections subside materially in developed countries and there is a steady rise in vaccinations, the outlook on global trade and commerce is improving. In India too, lockdowns are being relaxed in a phased manner, raising hopes for the economy returning to better days. Investors will be closely watching the Government’s preparedness to avert/deal with a possible third wave, better vaccine rollout and the impact of the pandemic on the country’s macro and fiscal health in the coming months. The rise in global inflation, its impact on commodity prices and the Fed’s reaction to rein in inflation may emerge as a key macro risk for India.”
PE/VC investments in May 2021(US$3.6 billion) were 33% lower compared to May 2020 (US$5.4 billion) and 52% lower compared to the previous month (US$7.5 billion in April 2021). PE/VC investments in May 2020 were propped up by large investments worth US$4.6 billion in Jio Platforms. The number of deals in May 2021 were at par with May 2020 and 14% lower compared to April 2020 (60 deals in May 2021 vs. 60 deals in May 2020 vs. 70 deals in April 2021).
Pure play PE/VC investments (excluding real estate and infrastructure sectors) recorded a 54% decline in value invested compared to May 2020 and 64% decline compared to previous month (US$2.5 billion in May 2021 vs. US$5.4 billion in May 2020 vs. US$6.8 billion in April 2021), due to fewer large deals. If we exclude the deals in RIL group entities last year; then, pure play PE/VC investments in May 2021 are almost 4.6 times the value recorded in May 2020 (US$790).
The real estate and infrastructure asset class recorded over US$1.1 billion in investments in May 2021, a significant improvement compared to US$5 million in May 2020 and US$644 million in April 2021, on the back of the large Blackstone-Embassy Industrial Parks deal worth US$715 million.
May 2021 recorded nine large deals (value greater than US$100 million) worth US$2.7 billion compared to five large deals worth US$4.9 billion in May 2020 and 15 large deals worth US$6.1 billion in April 2021. The largest deal in May 2021 saw Blackstone RE buyout Embassy Industrial Parks Private Limited from Warburg Pincus and the Embassy Group for US$715 million. The next large deal saw Multiples and CPPIB buyout Zydus Animal Health and Investments Limited for US$400 million.
In May 2021, growth investments were the largest deal segment with US$2 billion recorded across 20 deals (US$4.9 billion across 13 deals in May 2020), a 59% decline y-o-y. The significantly high value of growth investments in May 2020 was on account of US$4.6 billion invested in Jio Platforms. Buyouts recorded US$1.2 billion in investments across six deals (US$283 million across three deals in May 2020). Start-up investments recorded US$317 million across 30 deals (US$167 million across 34 deals in May 2020).
From a sector point of view, real estate with US$916 million recorded across four deals was at the top, mainly on account of the US$715 million Blackstone-Embassy Industrial Parks deal, followed by financial services with US$818 million in investments across nine deals. Next in line were Pharmaceuticals with US$733 million invested across three deals and e-commerce with US$305 million invested across eight deals.
May 2021 recorded 18 exits worth US$12 billion, almost 42 times the value of exits in May 2020 (US$286 million) and almost 4 times the value recorded in April 2021 (US$2.7 billion). This is the second highest monthly value of exits after the US$16 billion recorded in September 2018 due to the Flipkart-Walmart deal. Strategic exits in May 2021 were highest at US$10.4 billion across seven deals which includes the sale by CPPIB and Partners Group of their 90% stake in Global Logic for US$8.6 billion to Hitachi and the sale by Softbank of its 80% stake in SB Energy for ~US$1.8 billion (EV of US$3.5 billion) to Adani Green Energy Limited (AGEL), which were also the largest exits in 20211.
Another major exit in May 2021 saw Carlyle sell a partial stake in SBI Life Insurance for US$531 million.
May 2021 recorded total fundraises of US$154 million compared to US$50 million raised in May 2020 amidst the COVID-19 uncertainty. The largest fundraise in May 2021 saw Motilal Oswal raise US$89 million in the first close of its fifth real estate fund.
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The Indian Private Equity & Venture Capital Association (IVCA), is the apex body promoting the Alternative Investment Funds (AIFs) in India and promotes stable, long-term capital flow (Private Equity (PE), Venture Capital (VC) and Angel Capital) in India.
With leading VC/ PE firms, institutional investors, banks, corporate advisers, accountants, lawyers and other service providers as members, it serves as a powerful platform for all stakeholders to interact with each other. Being the face of the Industry, it helps establish high standards of governance, ethics, business conduct and professional competence. With a prime motive to support the ecosystem, it facilitates contact with policy makers, research institutions, universities, trade associations and other relevant organizations. Thus, support entrepreneurial activity, innovation and job creation.