Private equity investments hit a record high of $ 62 billion; The first Saudi investor in the PIF
Steady momentum in growth equity has been observed with $ 10 billion in investments driven by a massive surge in late stage transactions, which is higher than all previous years and almost at the same level as in 2019. In addition, a strong flow of transaction volumes continued. with an increase of 5% year on year (year-on-year) in a context of a slowdown in the total value of investments (excluding Jio Platforms and Reliance Retail details).
Saudi Arabia’s Public Investment Fund (PIF) made the largest investments worth $ 3.3 billion in three deals in 2020. Global Private Equity Fund KKR made six investments, worth $ 3 billion. Silverlake has invested $ 2.7 billion, including $ 500 million in Byju’s, outside of Jio and Reliance Retail. GIC, Mubadala and Abu Dhabi Investment Authority (ADIA) each invested $ 2.1 billion. Excluding Jio Platforms and Reliance Retail deals, Blackstone and GIC were the main contributors at around $ 1.5 billion each.
The pandemic has brought about a shift in the type of deals made, with investors focusing on alternative investment strategies such as distressed opportunistic sales and qualified institutional placements (QIPs). The top 15 deals in 2020 accounted for around 40% of deal value compared to 35% in 2019. Sectors like consumer technology and IT and IT services (ITeS) were the most important sectors in 2020 while healthcare healthcare experienced the fastest growth of around 60%, in 2019.
There has been a steady increase in the number of active private equity funds in 2020, with Global and Domestic General Partners (GPs) accounting for the bulk of the 60% share, followed by Limited Partners (LPs) and Corporates. As more funds focus on India, over 70% of investors agree that direct investment from global private equity firms and LP / Sovereign Wealth Funds (SWF) is the most big competitive threat, according to the report.
Fundraising declined 33% between 2019 and 2020, in several major APAC markets, with China posting large declines due to tighter federal government regulations. India’s share of APAC fundraising, however, remains stable at 3%. Additionally, investor confidence remained high with India-focused dry powder remaining resistant to $ 8 billion and over 90% of funds closed-to-target or oversubscribed.
Exit volume remained strong while the overall exit value declined 30% year-on-year in 2020. The year 2020 saw an unprecedented increase in exit returns driven by high multiples on invested capital and significant share of the volume of consumer technologies, IT / ITES and BFSI goes out. The top 10 exits accounted for 60% of the exit value, up from 50% in 2019, with BFSI, real estate and IT / ITES being the main contributors.
“Exit activity was subdued in the second and third quarters as owners held onto their assets amid a downturn, but rebounded strongly in the fourth quarter with strong public markets a key contributor,” said Arpan Sheth, Bain & Company partner. The year 2020 saw an unprecedented increase in exit returns driven by high multiples on invested capital and the significant share of exits from consumer technology, IT / ITES and BFSI. We expect exit momentum to continue over the next two years as the portfolios of major private equity investors mature in 2020) and several IPOs slated for the next 12-18 months are launched, a he added.
About 90% of India-based private equity funds agree their portfolios have been largely successful in weathering the Covid pandemic and are focused on efforts to stay ahead of the curve. In addition, a growing number of funds focus on issues of sustainability and environment, society and governance (ESG). Covid-19 has played a central role in accelerating several trends, including the increase in online touchpoints, the emergence of direct-to-consumer (D2C) actors, the adoption of remote working and the emphasis on healthier living.