Inflows into RIL arms take 2020 PE/VC investments close to 2019 level

Private equity and venture capital fund investments in India stood at USD 47.6 billion in 2020, at par with the previous year, on the back of flows into RIL's retail and telecom arms, a report said.

When looked at from the perspective of number of deals, exits secured by such investors and new fund raises for future, it was a disappointing year for the country, as per a report by consultancy EY and Indian Venture Capital Association.

Investments into Reliance Industries' (RIL) telecom arm Jio Platforms and retail arm came at USD 17.3 billion, or over a third of overall investments during the year, it said.

EY's partner Vivek Soni said the new year will be "very bright" for the PE and VC investments on the back of economic recovery becoming more broadbased and most sectors trending towards the pre-COVID levels.

In 2020, PE/VC investment activity ground to monthly average of less than USD 1.2 billion during the period March-June, the lowest ever in the past six years, he said, adding sentiment improved after July on the back of easy money measures in the developed world and saw an increased interest in technology and pharma sectors.

From a sectoral perspective, infrastructure was the biggest loser as new investments came down to USD 5 billion in 2020 from USD 13.8 billion in 2019, it said.

PE/VC exits too saw a significant decline of 46 per cent from 2019 levels, reaching a five-year low as pandemic induced lockdowns and the resulting disruptions roiled asset prices, forcing PE/VC investors to postpone stake sales to better times, he said, adding the exits came at USD 6 billion only.

Going by number of deals, there were only 921 deals in 2020 as against 1,030 in the previous year.

All deal types except growth deals recorded a drop in investments, with buyouts being the most affected, it said, pointing that there were 43 buyouts worth USD 11.8 billion compared to 61 buyouts worth USD 16.5 billion in 2019.

Startup investments recorded the steepest decline of 40 per cent to USD 4.8 billion in 558 deals as against USD 7.9 billion in 606 deals in 2019, the report said.

Fundraising for future investments declined by nearly a third to USD 8.2 billion during the year gone by, it said.

Soni said the mega liquidity unleashed by the US and European Central banks, low yields and the declining dollar is forcing large limited partners to increase their allocations towards higher yield generating and growing emerging markets which will benefit India.

Additionally, the inflows into RIL’s retail and telecom arm at the peak of pandemic has added a new dimension to India's attractiveness, he said.