Private equity and venture capital (PE/VC) investments in 2019 were at an all-time high in terms of both value and volume. According to the IVCA-EY monthly PE/VC roundup, at $48 billion, PE/VC investments in 2019 grew by 28 per cent over last year, mainly on account of significant investments in the infrastructure sector, which alone accounted for 30 per cent of all investments by value in 2019 compared to 12 per cent in 2018. In terms of volume, 2019 recorded 1,037 deals, compared to 769 deals in 2018, 60 per cent of which were in the start-up space. In terms of number of deals, start-ups recorded a 61 per cent increase in deal activity in 2019 compared to last year (378 deals in 2018).
It has been a record year for investments across all deal types, the most prominent being buyouts. For the first time, buyouts have emerged as the primary PE/VC deal type, overtaking growth capital deals and accounting for 34 per cent of all PE/VC investments by value in 2019, the report added.
Buyout activity in Indian PE/VC industry has grown from strength-to-strength as India moves towards global norms where buyouts are usually the largest deal type of PE/VC investment. Over the past two years, buyouts clocked $26.7 billion in deal value, which is more than the value of buyouts in the preceding 12 years combined. Also, number of buyouts in 2019 (58 deals) is the highest ever. Once again, this has been driven by significant increase in the value (180 per cent increase y-o-y) and number (123 per cent increase y-o-y) of buyouts in the infrastructure and real estate sectors, highlighted the report
Vivek Soni, Partner and National Leader - Private Equity Services, EY said, "2019 was third consecutive record-breaking year for PE/VC investments in India. At approximately US$48 billion, PE/VC investments equated to approx. 1.7 per cent of the GDP, which is similar to the Chinese benchmark in 2018. Private capital investments in India have grown at a CAGR of almost 44 per cent over the past three years, and this asset class now appears to have come of age in India."
"Going forward, while our outlook for 2020 is positive, we expect investment growth to slow down to about 15-20 per cent in 2020. We expect most PE/VC investors to continue investing in financial services, IT, e-commerce, retail consumer finance and healthcare. Infrastructure and real estate should continue to attract strong interest from real asset economy investors," he added.
As the Indian market matures, PE/VC deals are becoming larger and more complex. There were 111 large deals (value greater than $100 million) in 2019, aggregating to $35.2 billion and accounting for 73 per cent of total PE/VC investments made in 2019 compared to 81 large deals aggregating $27.9 billion in 2018. The value and volume of large deals have been progressively increasing over the past four to five years.
The largest deals during the year saw Brookfield buyout Reliance Jio's tower arm for $3.7 billion and Reliance Industries Limited's East-West pipeline for $1.9 billion. Brookfield-Reliance Jio's tower deal was also the largest ever deal in the Indian PE/VC industry.
From a sector point of view, most of the sectors recorded significant increase in PE/VC investments, according to the report. In 2019, 10 sectors recorded over $1 billion in PE/VC investments compared to nine in 2018. In 2019, infrastructure sector recorded the highest value of investments at $14.5 billion ($4.5 billion in 2018). Five of the top 10 deals in 2019 were in the infrastructure sector. Notwithstanding recent headwinds faced by the Non-Banking Financial Company (NBFC) sector, PE/VC investment activity in the financial services sector has recorded healthy growth. In 2019, at $9.1 billion, PE/VC investments in the financial services sector are up by 20 per cent compared to last year. 2019 also recorded the highest ever number of deals in the sector. Further, the number of PE/VC deals in the financial services sector (188 deals) in 2019 is the highest number of deals recorded by any sector, topping the previous high of 184 deals recorded by the e-commerce sector in 2015. This was followed by real estate ($6.1 billion across 71 deals), a 33 per cent y-o-y increase and e-commerce ($4.3 billion across 134 deals), which declined by 13 per cent y-o-y.
The year also recorded 156 PE/VC exits worth $11.5 billion, a decline of nearly 58 per cent from 2018 ($27 billion).