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India received $ 232.4 billion in Private Equity & Venture Capital investments during last decade

Mumbai, March 21 2020: The past decade, 2011-2020 saw the Indian PE/VC* industry come into the mainstream. The cumulative value of PE/VC investments between 2011-2020 totalled US$ 232.4 billion which is more than twice the value recorded in the preceding decade. This decade also saw many structural shifts in the Indian PE/VC industry including changes in the investor mix, deal type, deal size and sectors.
(* Private Equity is a large investment in developed companies and venture capital is a small investment usually made in initial stages of development of a company.)
This is the key finding of the latest IVCA-EY report, “PE/VC Agenda: India Trend Book”.
Says Renuka Ramnath, Chairperson,  India Private  Equity andVenture Capital Association (IVCA )& Founder, Managing Director & CEO, Multiples Alternate Asset Management Pvt. Ltd: “2020 was a defining year that saw the impact of the pandemic, digital acceleration and spotlight on policies on pharma, healthcare, infrastructure and manufacturing. Notwithstanding the challenges thrown up by the pandemic, the Indian PE/VC ecosystem has only become more resilient and better at finding newer opportunities bringing in much needed capital into the country; it is the single largest source of much needed FDI. During this past decade, $ value of Indian PE/VC investments grew from $8.4 billion in 2010 to $47.5 billion in 2020, a CAGR of ~19%.  . PE/VC backed companies are helping the cause of nation building by bringing in new business models, creating new jobs, backing entrepreneurs, and helping fund financial inclusion, better infrastructure, increase renewable energy and promote capital efficiency in the Indian economy.”
A large part of the funds invested were sourced from globally fungible pools of capital managed by international GP’s as only US$58.2 billion of India dedicated funds were raised between 2011-2020, which is approximately 25% of the PE/VC investments of US$232.4 billion invested during this period. Looking ahead to the next decade, as both the sector and the Indian economy grow, we believe more India dedicated fundraises will take place with many international funds planning a dedicated India investment strategy. Furthermore, in the coming decade, we foresee the emergence of many new first-time funds as seasoned investors with international franchises spin-off and turn entrepreneur.
While the decade gone by was a mixed bag for PE/VC exits, the Flipkart-Walmart deal was a turning point for the Indian PE/VC Industry, especially the start-up eco-system.
Growing on the strong foundation laid in the previous decade, the Indian PE/VC industry is expected to grow materially going forward as large global LP’s increase their allocations towards the emerging markets in general and India in particular. Additional factors like a ‘reform oriented’ government, implementation of business friendly policies, emergence of new investment structures like InvITs, REITS, and SPACs as well as a thriving start-up ecosystem are expected to enhance India’s status as an ‘attractive destination for PE/VC capital, across strategies - (start-up, growth, buyouts, PIPE) and asset classes (PE, Real Estate, Infrastructure, Credit).”
Notwithstanding the sharp downturn in investment sentiment due to the COVID-19 pandemic, the decade ended on a record high of US$47.6 billion in PE/VC investments in 2020. This was largely on account of a flurry of mega investments in Jio Platforms and Reliance Retail of US$17.3 billion. Without these investments, PE/VC investments in 2020 would have been lower by 36% on y-o-y basis. Though PE/VC investment activity rebounded in the fourth quarter of 2020 on the back of large stimulus programs by global central banks and hopes of return to normalcy with the successful development of vaccines for COVID-19, the pandemic has caused a significant shift in PE/VC investments from the traditionally ‘in favour’ sectors.
The pandemic has led to the rapid adoption of technology across companies and governments alike, as well as, brought into focus the need for investments in the life sciences sector. Sectors like edtech, life sciences, technology and some sub-sectors of financial services have demonstrated resilience to the disruptions caused by the pandemic and ensuing lockdowns and thus gained prominence over the traditionally favorite sectors for PE/VC investors like infrastructure, real estate, consumer and retail and sub-sectors of financial services like lending. Going forward into the new decade, we expect these new favorites to continue attracting higher than before PE/VC investments. In this decade, the PE/VC investment mix also changed significantly, progressing from primarily minority growth investments into one in which large buyouts have become a significant part of the overall PE/VC investment pie (by dollar value).
Key trends that emerged over the decade:

  1. Buyouts emerged as a key PE investment strategy accounting for 23% of total PE/VC investments during the decade at US$54 billion. Buyout investments (by dollar value) grew 11-fold between 2011 and 2020.
  2. Deals grew larger and more complex. Share of large deals (greater than US$100 million) in total investments increased from 40% in 2011 to 80% in 2020. Moreover, the last couple of years saw a rise in mega deals (value US$500 million and higher). The last two years recorded 45 mega deals compared to 35 such deals in the preceding eight years combined.
  3. New investments structures like InvITs and REITs provided additional fillip to PE/VC investments into the infrastructure and real estate asset classes. Almost 24% of all PE/VC investments by value in infrastructure in the past decade have been through the InvIT structures all of which happened in the past two years.
  4. Pension funds and sovereign wealth funds have entered the Indian PE/VC market in a big way, directly investing large sums of long-term capital. Investments by these funds increased from US$1 billion in 2011 to US$11.1 billion in 2020⎯ an 11-fold increase over a 10-year period. Between 2011-2020, these funds have directly invested US$50.7 billion in India, accounting for ~22% of total PE/VC investments.
  5. Financial services, infrastructure, real estate, e-commerce and technology have been the most preferred sectors for PE/VC investments, accounting for 60-70% of all PE/VC investments during the decade.
  6. The Indian start-up ecosystem has developed into one of the most vibrant globally. The number of start-up investments have grown more than three-fold from 159 in 2011 to 557 in 2020. According to a report by NASSCOM, with 38 unicorns as of 2020, India has the third largest number of unicorns globally after US and China.