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India attracts more PE investments in growth companies than China

Kanchan Samtani, Managing Director & Partner, BCG India points out that internet and tech space have grown from 30 per cent of overall number deals to over 50 per cent in 2019

Rukmini Rao | August 25, 2020 | Updated 20:47 IST
India attracts more PE investments in growth companies than China
India still lags behind in providing an IPO exit compared to other important Asian economies

With internet and tech companies ruling the roost, India is at the forefront in attracting private equity funds in growth companies compared to other economies in the Asia-pacific region. The recent report by Boston Consulting Group (BCG)  points out that between 2015-19, 76 out of the 200-odd PE deals were valued at over 10 million in India. About 76 per cent of it were in companies in the growth and expansion stage. However, compared to China which also saw twice the number of deals (600 deals) in the same period, 58 per cent were investments made in the growth stage companies.

Kanchan Samtani, Managing Director & Partner, BCG India points out that internet and tech space have grown from 30 per cent of overall number deals to over 50 per cent in 2019. "This mirrors India's own stage of development; late stage opportunities are a larger share of deals of more mature economies such as Australia & NZ, Japan and South Korea. We do expect this will continue to gather more momentum in India over time especially as more and more tech companies achieve scale," said Samtani.

While the overall PE deals in India have grown at a CAGR of 30 per cent during 2017-2019, last year alone  80 per cent of deal value was led by global funds including state-owned investment firms like Singapore (GIC). However, India still lags behind in providing an IPO exit compared to other important Asian economies. The share of IPO exits in China, South Korea, Japan, South East Asia stood at 59 per cent, 36 per cent, 42 per cent and 16 per cent, respectively. India share was a mere 12 per cent. "In India so far, exits are more dominated by trade sale and secondary sale rather than IPOs. This has been driven by market maturity and depth. As markets mature the share of IPO driven exits tends to get much higher," says Samtani.

With the COVID-19 crisis accelerating the ongoing strong tech and digitisation trends, investments into financial services, consumer tech businesses, health, wellness and tech supported health services such as telemedicine, online pharmacies etc are expected to gain momentum . "The Indian market is also dominated by family-owned businesses and partnering effectively with promoters will be an important theme for making successful investments across sectors," she added.

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