- At US$26.9 billion, investments recorded 45% increase y-o-y
- Growth investments were the highest at US$11 billion
- Buyouts recorded a nine-fold y-o-y increase to US$7.9 billion
- Exits in 2021, at US$22.5 billion, are second highest in terms of value
Mumbai, 19 June 2021: According to the IVCA-EY monthly PE/VC roundup, 1H21 recorded investments worth US$26.9 billion across 518 deals, on the back of 64 large deals worth US$19.1 billion. Exits recorded US$22.5 billion across 118 deals, with 29 strategic exits worth US$12.7 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.”
On a half-yearly basis, PE/VC investments in 1H21 recorded a 45% increase y-o-y, but declined by 9% sequentially (US$26.9 billion in 1H21 vs. US$18.5 billion in 1H20 and US$29.1 billion in 2H20). In terms of number of deals, 1H21 recorded an increase of 18% compared to 1H20 and 7% compared to 2H20 (518 deals in 1H21 vs. 440 deals in 1H20 and 483 deals in 2H20). The y-o-y increase in the value of PE/VC investments in 1H21 appears impressive primarily on account of a lower base effect as 1H20 was significantly affected by the uncertainties that came along with the onset of the COVID-19 pandemic and the strict nationwide lockdown that ensued thereafter.
Pure play PE/VC investments (excluding real estate and infrastructure sectors) recorded its highest ever value of investments in 1H21, which is 32% higher compared to 1H20 and 5% higher than 2H20 (US$21.9 billion in 1H21 vs. US$16.5 billion in 1H20 vs. US$20.9 billion in 2H20).
The improvement in 1H21 over 1H20 was mainly on account of higher number of large deals. 1H21 recorded 64 large deals aggregating to US$19.1 billion (compared to 30 large deals aggregating to US$13.6 billion in 1H20), However, the value of large deals in 1H21 were 20% lower than 2H20 that had recorded 55 large deals aggregating to US$24.1 billion. The largest deals in 1H21 included Blackstone along with ADIA, UC Investments and GIC acquiring a majority stake (~75%) in Mphasis for around US$2.8 billion. The deal involves an older fund of Blackstone (Blackstone, Blackstone Capital Partners VI) selling its ~55% stake in Mphasis to Blackstone Capital Partners Asia and Blackstone Capital Partners VIII while also announcing an open offer to acquire additional 26% stake, taking the combined planned purchase consideration to around US$2.8 billion followed by a group of investors including QIA, GIC, Goldman Sachs, Naspers and others investing ~US$800 million in Swiggy.
Growth deals were the highest with US$11 billion invested across 138 deals (US$13.1 billion across 95 deals in 1H20 and US$12.3 billion across 93 deals in 2H20), followed by buyouts, which was the most impacted deal strategy post the onset of the COVID-19 pandemic in 2020. Buyouts recorded a nine-fold y-o-y increase to US$7.9 billion across 28 deals (US$885 million across 15 deals in 1H20 and US$10.9 billion across 28 deals in 2H20).
Start-up investments more than doubled to US$5.9 billion across 280 deals in 1H21 on a y-o-y basis (US$2.2 billion across 261 deals in 1H20 and US$2.5 billion across 295 deals in 2H20). PIPE investments recorded US$1.2 billion across 62 deals in 1H21 (US$990 million across 30 deals in 1H20 and US$2.1 billion across 32 deals in 2H20). Credit investments recorded US$836 million in 1H21 compared to US$1.3 billion in 1H20 and US$1.2 billion in 2H20.
From a sector perspective, technology was at the top (US$5.2 billion across 67 deals), highest ever value of investments in the sector, surpassing the previous high recorded in 2019 (full year) of US$4.3 billion by 22% and is 59% higher than investments recorded in 2020 (full year). E-commerce was second in line with US$4.8 billion invested across 83 deals, 72% higher than US$2.8 billion across 125 deals in 2020 (full year) and is almost at par with the all-time high of US$4.9 billion recorded by the sector in 2017 (full year) followed by financial services sector (US$3.6 billion across 90 deals, 81% y-o-y increase). Media and entertainment is another sector that has recorded all-time high numbers of US$1.3 billion across 25 deals, 56% higher than previous all-time high of US$809 million recorded in 2020 (full year).
On a year-on-year (y-o-y) basis, exits recorded more than a seven fold increase in terms of value in 1H21 compared to 1H20 and 2H20 (US$22.5 billion vs. US$3 billion in 1H20 and US$3.1 billion in 2H20) and more than 3.7 times the value recorded in entire 2020. This is also the highest half-yearly value of exits and second highest on an annual basis. The number of exits in 1H21(118 exits) were 82% higher compared to 1H20 (65 exits) and 37% higher compared to 2H20 (86 deals).
Exits via strategic sale were the highest with US$12.7 billion recorded across 29 deals, accounting for 57% of all exits in 1H21 which is mainly on account of the large GlobalLogic-Hitachi deal worth US$8.6 billion. Next in line were exits via secondary sale (sale to other PE funds) at US$4.5 billion (31 deals) that recorded the highest ever half-yearly value and four times the value recorded in entire 2020. Open market exits recorded 38 deals worth US$2.9 billion. PE-backed IPOs too recorded highest ever half-yearly value of exits in 1H21 and second highest in terms of number of IPOs, that saw PE funds garner US$1.6 billion in sale proceeds across13 IPOs.
From a sector perspective, technology sector recorded the highest value of exits in 1H21 (US$11.8 billion across 11 deals) which is more than the exits recorded by the sector in the preceding eight years combined. This is mainly on account of Hitachi’s buyout of the stake held by CPPIB and Partners Group in GlobalLogic for US$8.6 billion. Financial services was the next big sector with 22 exits worth US$2.5 billion.
Apart from GlobalLogic, the second largest exit too was from the technology sector where an older fund of Blackstone (Blackstone, Blackstone Capital Partners VI) sold its ~55% stake in Mphasis to Blackstone Capital Partners Asia and Blackstone Capital Partners VIII fund for ~US$2 billion.
1H21 has recorded four US$1 billion plus exits which is same as that recorded in the previous three years combined. Large exits (value greater than US$100m) accounted for US$20.8 billion in value across 24 exits in 1H21 compared to 12 such exits worth US$3.8 billion in 2020 (full year), 32 exits worth US$8.7 billion in 2019 (full year) and 32 exits worth US$25 billion in 2018 (full year).
1H21 recorded US$2.8 billion in fundraises, 72% higher compared to 1H20 (US$1.6 billion) and 58% lower compared to 2H20 (US$6.6 billion). The largest fundraise in 1H21 saw Kotak Real Estate fund raise US$380 million for its 11th fund for investments across both early and late-stage real estate projects in the residential, commercial, retail, warehousing and hospitality sectors.
Notes to editors
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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.
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