The third quarter of calendar year 2019 has recorded the highest ever quarterly investment by private equity (PE) investors and venture capitalists (VCs) worth $16.4 billion across 289 deals.
According to the IVCA-EY monthly PE/VC round-up, the total value of PE/VC investments in 2019 till date stood at $40.3 billion, 7.4 per cent higher than total investments in 2018. Investments in Q3CY19 increased by 69 per cent in value terms compared to the corresponding period last year and grew 37 per cent compared to the previous quarter. In terms of volumes, deals increased by 51 per cent compared to Q3CY18 and were at par compared to Q2CY19 (299 deals). All the quarters of 2019 have recorded a strong growth in deal activity compared to the corresponding quarters in 2018.
The outperformance came on the back of record investments ($7.8 billion) in the infrastructure and real estate asset classes, a jump of 4.4 times compared to the corresponding period last year, says the report. As a result, these two asset classes have together accounted for 48 per cent of all PE/VC investments in Q3CY19 compared to 18 per cent in Q3CY18.
While investments in real estate increased by 194 per cent to $2.5 billion over $863 million in Q3CY18, the infrastructure sector made the greatest impact with investments at $5.3 billion, an increase of 5.9 times compared to the same period in Q3CY18. This was followed by financial services sector with $2.5 billion invested across 63 deals.
Vivek Soni, Partner and National Leader Private Equity Services, EY said, "At $16.4 billion, Q3CY19 has recorded the best quarterly performance ever for PE/VC investments across all three main asset classes of private capital - PE, infrastructure and real estate. The deal flow in 2019 has been good with each successive quarter being better than the preceding one. With increasing interest from large global pension and sovereign wealth funds combined with evolution of new investment structures like InvITs and REITs, we continue to project sustained growth in real asset investments in India."
Large deals of value greater than $100 million continue to drive the growth of PE/VC investments. The third quarter recorded 40 large deals aggregating to $12.7 billion, compared to 17 large deals aggregating to $6.6 billion in Q3CY18 - the highest number of large deals in any quarterly period. Fourteen out of the 40 large deals were in the infrastructure (five deals) and real estate (nine deals) sectors and were worth $7.4 billion. Additionally, six out of top 10 deals in Q3CY19 were in the infrastructure (three deals) and real estate (three deals) sectors.
Brookfield's buyout of Reliance Jio's tower arm for $3.7 billion was the largest deal in Q3CY19, followed by Baring PE Asia's buyout of CitiusTech Healthcare Technology Private Limited for $800 million and GIC's $631 million investment in IRB Infrastructure Developers' roads platform.
However, unlike investments, exits have not had the same momentum as seen in 2018. In 2019, year-to-date PE/VC exits total $8.1 billion compared to $8.5 billion for the same period last year (excluding the mega $16 billion Flipkart deal). Nonetheless, at $3.9 billion, the quarter has been the best quarter so far for exits in 2019 helped by $1.5 billion partial buyback by OYO's founder from the company's early stage investors.
"The government's step to rationalise the corporate tax rate and introduce positive changes to the FPI policy are steps in the right direction, and increase attractiveness of India for long-term capital investment relative to its emerging markets peers. In our view, notwithstanding headwinds like volatile oil prices, global trade relationships between the US and China, and stress in India's credit ecosystem, Indian PE/VC industry continues to make sizeable commitments and India appears to be on track to develop into one of the large PE/VC markets globally," he adds.