Despite the US$ 11.7 billion raised by Reliance Industries Ltd (RIL) through stake sales, venture investments in 2020 have declined by a fifth to US$ 28.9 billion till September, consultancy firm EY said in a report on Thursday.
Since mid-March, coronavirus infections started getting reported in the country, which has now become the second highest globally in terms of numbers.
The lockdowns severely dented economic activity, leading to a 23.9 percent contraction in the gross domestic product (GDP) for the April-June period and expectations of a 9.5 percent contraction by the Reserve Bank of India (RBI) for 2020-21.
Excluding the investments in Jio Platforms (RIL’s telecom arm) and Reliance Retail Ventures, investments by private equity (PE) and venture capital (VC) funds for the January-September 2020 period have declined 53 percent to US$ 17.2 billion, the lowest in four years, EY’s partner Vivek Soni said.
He expects the Indian PE/VC investments to close the year at around US$ 24-28 billion, excluding the bets in Reliance arms.
From a deal count perspective, the number of transactions came down to 686 in January-September 2020 as against 764 in the corresponding period last year.
Last year’s favourite sectors like infrastructure, real estate and financial services have witnessed significant decline in investment flow, while essential goods and services like pharma, telecom, digital technology and education technology have received a major chunk of investments, the firm said.
Real estate and infrastructure companies had garnered investments of US$ 16.1 billion, accounting for 44 percent of the overall investments last year, and the same has come down to US$ 2.9 billion this year, it said.
Telecom was the top sector with a 10-fold increase to US$ 10 billion invested across 13 deals, followed by financial services at US$ 4.1 billion in 114 deals (a 32 percent decline), technology with US$ 2.3 billion invested across 106 deals (decline of 30 percent), and a five-fold increase in pharmaceuticals with US$ 1.9 billion invested across 27 deals.
While all the deal segments reported a decline, buyouts were the worst hit, being 79 percent down at US$ 2.9 billion during the nine-month period which is lowest in three years.
With valuations impacted significantly, exits by the PE and VCs have also slowed, more than halving to US$ 3.6 billion and are expected to remain muted for a considerable amount of time, it said.
Fundraising by such dedicated funds also nearly halved to US$ 4.4 billion as the limited partners were focused on managing their larger public market portfolios and restricted their new commitments to tried and tested funds only, it said.