Press release

18 Jan 2022

2021 PE/VC investments and exits record all-time highs of US$77 billion and US$43.2 billion respectively: IVCA-EY report

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Related topics Forensics
  • At US$28.8 billion VC/start-up investments were the highest ever and accounted for the largest share (37%) of all PE/VC investments in 2021
  • India becomes third largest start-up eco-system with 44 start-ups achieving unicorn status in 2021
  • 2021 recorded 44 PE-backed IPOs, which is the highest ever
Mumbai, 18 January 2022: According to the IVCA-EY monthly PE/VC roundup, 2021 recorded investments worth US$77 billion across 1,266 deals including 164 large deals worth US$58 billion. Exits recorded US$43.2 billion across 280 deals in 2021, with 93 strategic exits worth 16.9 billion and 44 PE-backed IPOs worth US$5.1 billion.

Vivek Soni, Partner and National Leader Private Equity Services, EY said, “Indian PE/VC investments in 2021 ended with ~ US$77 billion, as the aggressive pace of deal making helped drive investment activity across all deal types, sizes and sectors. 2021 PE/VC investments were 62% higher than 2020 (154% higher than 2020, excluding the one-off RIL deals), principally propped up by pure play PE/VC investments that increased by 79% y-o-y (200% over 2020, excluding RIL deals). While we had projected 2022 to be a record-breaking year for both investments as well as exits; pretty early on, the velocity and size of this record setting deal activity kept picking up pace, especially in the second half of 2021.

Key highlights from 2021 are as follows:

  • Diverging from the past trend when growth deals and buyouts dominated PE/VC investments, start-up investments emerged as the top investment segment in 2021 recording US$28.8 billion accounting for 37% of all PE/VC investments in 2021. 
  • Investments in start-ups was a defining feature of 2021 and 2021 saw India overtake UK as the third largest ecosystem for start-ups with 2021 witnessing 44 unicorns. While most sectors recorded increase in investments, e-commerce and technology were the top sectors each witnessing record level of investments of US$15 billion and US$14.3 billion respectively. 
  • India is now amongst the world's fastest-growing start-up ecosystems with over 80 unicorn start-ups as of 2021. The emergence of new models in fintech, consumer internet, education, enterprise tech and media and entertainment has revitalised funding in these sectors.  
  • Larger deals continue to dominate the deal landscape with deals greater than US$100 million accounting for 75% of all deals by value in 2021. 2021 recorded 164 large deals aggregating to US$58 billion compared to 85 large deals aggregating to US$37.8 billion in 2020.
  • PE/VC exits too had a spectacular year in 2021, culminating in over 280 exits adding up to more than US$43 billion, rebounding smartly from a five-year low of US$6 billion in 2020. Large strategic deals, record levels of secondary trades and frantic IPO activity catapulted exits to 7x the value recorded in 2020 and 60% higher than the previous high of US$27 billion recorded in 2018.
  • Exits via sale to strategics were the highest at US$16.9 billion (93 deals) in 2021 as large, cash rich corporates as well as PE/VC backed category leaders / platforms used the pandemic induced opportunity to consolidate market share and acquire new capabilities. 
  • Exits via secondary sales were second in line with US$14.4 billion recorded across 56 deals, which is more than the value recorded in previous seven years combined and 14 times the value recorded in 2020 (US$913 million across 20 deals). 
  • 2021 was also a record year for PE/VC-backed IPOs with exits worth US$ 5.1 billion recorded across 44 IPOs (2x the previous high of 22 PE/VC-backed IPOs recorded in 2017). This year includes many firsts for the Indian market like the first SPAC listing by an Indian company in a US bourse and IPOs by many new-age start-ups from e-commerce and fintech sectors. 
  • Fund raising activity in 2021 remained flattish at US$7.7 billion (6% lower than 2020) but is expected to pick up in 2022 as large LP’s will look to increase their allocations towards alternatives and emerging markets in the wake of lower expected returns from other large asset classes.  
  • ESG / sustainable investments have now acquired centre stage. India offices of global firms and the larger Indian GP’s have incorporated ESG evaluation frameworks within their broader investment evaluation standards.
As India’s economic recovery gathers steam and becomes more broad-based, most sectors are expected to return / trend towards their pre-COVID levels. At a macro level, we expect India to continue benefitting from large investors shifting their allocations higher towards emerging markets as they look to deploy record levels of dry powder. The evolving geopolitical dynamic between US/ Europe and China is also increasing India’s attractiveness as an investment destination. With the better-than-expected Indian economic revival, successful vaccination drives and alignment of global macro factors, we expect 2022 to improve on the 2021 tally for both Indian PE/VC investments as well as exits by 20%-25%.

Rising inflation across key global markets, the pace of interest rate tightening by the US Fed, spikes in crude oil prices, severity and scale of any future COVID waves and impending elections in key Indian states remain key downside risks to watch out for as the Indian PE/VC juggernaut rolls on in 2022.”

Investments

PE/VC investments in 2021 have recorded an all-time high both in terms of value and volume. Dollar value of PE/VC investments in 2021 recorded US$77 billion, 62% higher than US$47.6 billion recorded in 2020. In terms of number of deals, 2021 recorded 1,266 deals, 37% higher compared to 2020 (923 deals). If we adjust 2020 for the US$17.3 billion invested in RIL group companies in 2020, 2021 saw PE/VC investments increase by almost 154% over the remaining US$30.3 billion invested in 2020.

Headline PE/VC investment value in 2021 was significantly bolstered by record PE/VC investments of US$28.8 billion in start-ups which accounted for 37% of all PE/VC investments in 2021 and a rebound in buyouts that recorded US$22 billion in investments, almost twice the value recorded last year. All this was underpinned by an increase in global liquidity and an emerging sanguine view by investors on India’s growth prospects.

One of the biggest reasons for the strong performance of PE/VC investments is the sharp increase in pure-play PE/VC investments (investments in sectors excluding real estate and infrastructure) that recorded a 79% increase y-o-y (US$67 billion in 2021 compared to US$37.4 billion in 2020) and accounted for 87% of total PE investments by value. Pure play PE/VC investments were dominated by investments in start-ups that accounted for 42% (US$28.2 billion) of all pure-play PE/VC investments.

In terms of deal type, all deal types except growth deals recorded increase in investments. Contrary to the past trends where growth and buyouts used to be the top categories by value, for the first time, PE/VC investments in start-ups were the highest, recording US$28.8 billion in 2021 (US$7.3 billion in 2020), almost equal to the total value invested in start-ups in the previous three years combined and 2.5 times the previous high of US$11.7 billion recorded in 2019.

After recording a significant decline amidst the pandemic in 2020, buyouts recorded a strong rebound and were the second largest deal type with US$22 billion recorded across 63 deals. This is also the highest ever - almost twice the value recorded last year (US$11.8 billion) and 28% higher compared to the previous high recorded in 2019 (US$17.2 billion).

Growth investments recorded US$19.2 billion across 183 deals, 16% lower than last year (US$22.9 billion). 2020 had recorded large investments in Reliance group entities worth US$17.3 billion. Adjusted for these one-off large investments in 2020, growth investments have grown almost 3.3 times in 2021.

Private investment in public equity (PIPE) deals increased by 46% to US$4.5 billion across 77 deals (US$3.1 billion across 62 deals in 2020). Credit investments were at par with 2020 at US$2.6 billion across 85 deals (US$2.6 billion across 74 deals in 2020).

Large deals continue to be a highlight for PE/VC investments with deals greater than US$100 million accounting for 75% of all deals by value in 2021. 2021 recorded 164 large deals aggregating to US$58 billion compared to 85 large deals aggregating to US$37.8 billion in 2020. Large deals had helped 2020 record all-time high PE/VC investments despite a subdued investment sentiment with investments in Reliance Group entities (worth US$17.3 billion) accounting for19 out of the 85 large deals. The largest deals in 2021 include US$3.6 billion invested in Flipkart by Softbank, GIC, CPPIB, Tencent and other investors followed by Carlyle’s buyout of Hexaware for US$3 billion from Baring PE Asia. 2021 saw nine mega deals that were US$1 billion or higher {2020 – 10 deals (4 deals excluding investments in RIL group entities), 2019 – three deals}.

From a sector point of view, almost all major sectors recorded increase in value of investments in 2021. 

  • E-commerce was the top sector with US$15 billion invested across 176 deals (5.4 times increase y-o-y), highest ever value of investments in the sector and greater than investments received by the sector in previous three years combined. This is also the highest value of investments received by any sector ever on the back of mega investments in Flipkart, Oyo, Ola and Swiggy.
  • Technology sector was the next largest sector with US$14.3 billion invested across 217 deals (4.4 times increase y-o-y) and more than the total investments received by the sector in past four years combined.
  • Financial services with US$11.2 billion invested across 219 deals (US$4.8 billion across 146 deals in 2020), business and professional services with US$4.8 billion across 39 deals (US$226 million across 40 deals in 2020) and media and entertainment sector with US$4.5 billion across 56 deals (US$809 million across 60 deals in 2020) were the other large sectors for PE/VC investments.

Spotlight: VC/start-up investment trend in 2021

2021 has been the best year for Venture Capital (VC)/start-up investments both in terms of value and volume. VC/start-up investments in 2021 (US$28.8 billion) were 4 times the value recorded in 2020 (US$7.3 billion). In terms of number of deals VC/start-up deals were the highest ever in 2021 (858 deals), 37% higher than 2020 (628 deals) and 26% higher than the previous high of 681 deals in 2019.

As a fallout of the pandemic, VC/start-up investments were amongst the worst hit in 2020, declining by 38% on a y-o-y basis (US$11.7 billion in 2019) despite the number of deals declining by only 8% (628 deals in 2020 vs. 681 deals in 2019). After the onset of the pandemic, amidst the ensuing uncertainty, VC/start-up investments declined to a trickle (US$238 million in May 2020) as VC funds became more risk averse and refrained from investing in start-ups which traditionally have high cash burn rates. However, as the pandemic progressed, there was an accelerated adoption of e-commerce/tech enabled businesses globally as well as in India, driven by the ease of use and convenience it provided. The pandemic also accelerated the learning curve for technology adoption and online commerce among the less tech savvy and first-time users.

As a result, 2021 recorded a strong pick-up in deal activity with average total VC/start-up investments in each month of around US$2 billion compared to US$600-800 million in the past couple of years. The average deal size in 2021 was US$34 million, almost twice the average deal size of the previous five years of around US$17 million.

All sectors recorded significant increase in VC investments in 2021 with eight sectors recording over US$1 billion in VC/start-up investments. E-commerce received the highest VC/start-up investments in 2021 of US$8.8 billion across 143 deals (6.3 times the value recorded in 2020 of US$1.4 billion), accounting for 31% of VC/start-up investments in 2021, which is also the highest ever VC/start-up investment in any sector, followed by financial services that received US$6.9 billion in VC/start-up funding across 142 deals (4.9 times the value recorded in 2020 of US$1.4 billion), technology sector that received US$3 billion in VC/start-up funding across 180 deals (three times the value recorded in 2020 of US$1 billion) and education sector which recorded US$1.9 billion in VC/start-up investments across 77 deals (two times the value recorded in 2020 of US$908 million).

On the back of large and ever-increasing VC funding, India is becoming the world's fastest-growing start-up ecosystem. The Hurun Research Institute's Global Unicorn Index 2021 saw India overtake UK as the third largest ecosystem for start-ups, with over 80 unicorn start-ups as of 2021 which includes more than 50% (44 unicorns) added in 2021 compared to 15 unicorns added by UK. The leading countries - the US added 254 unicorns whereas China saw 74 unicorns added in 2021.

The 44 unicorns that were added in 2021 had a total valuation of US$90.7 billion, a record year for the country. 2020 and 2019 saw 10 and 9 unicorns, respectively. Bengaluru is India’s unicorn capital with the highest number of unicorns headquartered there, followed by Delhi (NCR) and Mumbai.

As of year-end 2021, Flipkart and BYJU’S were the highest valued unicorns in India with valuation of over US$15 billion each.

Exits

In 2021 exits recorded an all-time high of US$43.2 billion, more than 7x the value recorded in 2020 and 60% higher than the previous high of US$27 billion recorded in 2018. In terms of volume, exits recorded 85% increase compared to 2020 (280 deals in 2021 vs. 151 deals in 2020).

Exits via sale to strategics were the highest at US$16.9 billion (93 deals) in 2021, 16.5 times the value recorded in 2020 (US$1 billion across 44 deals) and second highest value of strategic exits. In terms of numbers, strategic deals in 2021 were the highest ever.

Exits via secondary sale (sale to other PE/VC funds) were second in line with US$14.4 billion recorded across 56 deals, which is more than the value recorded in previous seven years combined and 14 times the value recorded in 2020 (US$913 million across 20 deals).

2021 was a record year for PE/VC-backed IPOs with exits worth US$ 5.1 billion recorded across 44 IPOs (2x the previous high of 22 PE/VC-backed IPOs recorded in 2017) which includes many firsts for the Indian market like the first SPAC listing by an Indian company which saw ReNew Power list on the NASDAQ via a merger with RMG Acquisition Corp. II, a blank cheque special purpose acquisition company (SPAC) and many first-time IPOs by new-age start-ups like Zomato, Nykaa, Policybazaar and PayTM. The PayTM IPO was the largest ever PE-backed IPO in India as well as the largest IPO in India’s corporate history raising US$2.5 billion.

From a sector point of view, technology sector recorded the highest value of exits in 2021 (US$17.4 billion across 39 deals vs. US$847 million across 10 deals in 2020) accounting for 40% of all exits by value on the back of few mega exits like the US$8.6 billion exit from Global Logic by CPPIB and Partners Group and Baring PE Asia’s US$3 billion exit from Hexaware. Financial services was the next big sector with exits worth US$9.5 billion across 49 deals (US$2.1 billion across 40 deals in 2020). E-commerce recorded the third highest value of exits at US$2.6 billion across 30 deals (US$107 million across nine deals in 2020) on the back of large strategic acquisitions of 1MG and BigBasket by the TATA Group and four IPOs including Zomato, Nykaa, Go Fashion and CarTrade.

Fundraise

2021 saw US$7.7 billion in fundraise; 6% lower than last year (US$8.2 billion in 2020). There were 29 fund raises of US$100 million and above in 2021 compared to 13 last year. The largest fundraise in 2021 saw A91 Partners close its second fund at US$525 million for investments in technology, consumer and financial services, followed by EvolutionX Debt Capital (a JV by DBS and Temasek) which raised a US$500 million venture debt fund for investments in opportunities arising from an increasingly digital economy – across sectors such as financial services, consumer, healthcare, education and industrial development.

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About IVCA

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.