The State of Indian Private Equity

The State of Indian Private Equity

“2021 was a milestone year for India, and a slight moderation should be anticipated as the market looks to consolidate the year’s wins and step into a new phase, with higher deal values and wider exit opportunities supported by a larger pool of quality assets.” – Bain & Co.

The following is an excerpt from the India Private Equity Report for 2022 by Bain & Co.:

“2021 has been a banner year that saw India private equity (PE) and venture capital (VC) bounce back from a pandemic-induced slowdown with fury. Reaching approximately $70 billion in investments, the PE-VC market was buzzing with frenetic deal activity and a complementary acceleration in exit momentum. While the first half of the year stuttered as India faced a devastating second wave of Covid-19 and experienced lockdowns and various uncertainties, the economy shifted back into gear in the second half in a quick rebound as a rapid vaccination rollout was undertaken.”

Faster than most major economies

Image source: Bain & Company

PE and VC investments in India grew faster in 2021 than most other major economies – seeing an astonishing 96% growth rate over 2020. India not only saw record velocity in closed deals (up from 1100 each the prior two years to over 2000 in 2021), but it also saw a major increase in VC and growth equity, expanding to almost $40 billion – almost four times higher than the 2020 value for the same. This also took its share of overall investments to over half of the total.

Image source: Bain & Company

Political uncertainties exacerbating the flight of capital away from China centred greater investment in India than ever before. This allowed India to gain a much stronger foothold in the overall Asia-Pacific (APAC) market, a trend experts think is set to continue well into the coming decade.

Post dealing with the concerns associated with the COVID-19 pandemic, India demonstrated both political and economic stability – thereby drawing in an enviable volume of investor capital over the past few years. This, coupled with a maturing investment landscape with a wide diversity of fund types and sizes, improvement in asset quality and governance, a vibrant market for exits (exit momentum quadrupled to almost $36 billion, with ‘huge exits across sectors as valuations inflated further’) and an abundance of ready capital have all played a positive role in boosting PE-VC investments in India.

There was an expansion in buyouts deal value by almost five times up to over $16 billion with average deal value tripling since 2016 and hitting over half of all PE investments. This, added to the host of oversubscribed IPOs last year, i.e., new companies listing on public exchanges (Nykaa, Zomato etc.) simply served as an added complement to the appetite shown by Indian retail investors for new-age business models.

Research from Bain & Co. found that “2021 saw many themes from the previous years continue. The strong deal flow from previous years continued and accelerated even further, with an 87% increase over last year’s volumes. The number of large cheque size investments also witnessed a significant increase.” There were also eleven investments of value of over a billion USD each, almost doubling the number from the year prior.

Image source: Bain & Company

Much of the investments of 2021 were driven by consumer tech and IT/ITES – accounting for almost 60% of the year’s deal value at $44 billion. This indicated not only the expanding share of growth captured by the internet and tech sectors, but also of the sector’s attractive resilience through uncertainties as business models in said sectors adapted much faster than traditional models in most other sectors.

Read the full Bain & Co. report here

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