With more than 1,000 private equity (PE) and venture capital (VC) deals valued at $45 billion, the highest in the last decade, India continued to be the second largest deal market in Asia-Pacific in 2019, said a Bain & Company report on Wednesday.
In 2019, India saw an increase in the number of large deals greater than $100 million, a rise in their average deal size and a surge in VC investments, said the “India Private Equity Report 2020”.
India’s share of the Asia Pacific deal market increased to nearly 25 percent in 2019 and investment value was about 70 percent higher than 2018 and nearly 110 percent higher than the previous five-year average.
The top 15 deals in India, which constituted more than 35 percent of total investment value in 2019, five were in real estate; three in IT and IT-enabled services (ITES); and the rest across banking, financial services and insurance (BFSI), telecommunications, energy and consumer technology.
However, exit value in 2019 decreased, finishing at nearly $13 billion, compared to $17 billion in 2018 (excluding Flipkart’s exit), but was still the third-highest for the last decade, said the report.
The dip over last year was driven by a decrease in the number of exits from 265 to 200.
With an unpredictable public market, strategic sales became the preferred mode of exit, accounting for about 50 percent of exit volume.
According to Bain’s analysis, India-focused dry powder will remain healthy, but a potential reduction in investments could occur in the first half of 2020, accompanied by a price correction across the board due to COVID-19 disruptions.
“From an investment perspective, we will likely see a short-term dip in investment activity with Covid-19, as already evidenced globally,” Arpan Sheth, Partner, Bain & Company and one of the lead authors of the report, said in a statement.
“However, this imminent price correction across the board will present an investment opportunity. Investors need to triage their portfolio and take actions to adapt to the changes in the economy which includes taking immediate actions to ensure business continuity and plan for value creation to retool their businesses for the future,” Sheth added.
The report added that Software as a Service (SaaS) and cross-sector technologies will be the most attractive opportunities for investors in the future, expected to grow around 50 percent annually from nearly $6 billion in 2019 to over $20 billion in 2022.
“The market disruption caused by Covid-19 could lead to growth in select pockets such as e-commerce, enterprise technology/SaaS, healthcare, on-demand services,” Sheth said.
