- Date : 23/04/2022
- Read: 3 mins
With the economy normalising, India's PE/VC industry can evolve into a superpower. Global trends point towards an improved interest in BFSI, ITES, and consumer staples, showing the complete growth of the deal value.
The recent pandemic has altered the way of ventures analysis and building of prospects regarding their performance. In fact, such things were never true for the private equity and venture capital industries. This industry has now evolved as one of the most crucial finance sources in capital-deficient India.
With the economy going into a tailspin because of the COVID-19 pandemic, analysts and investor companies in the markets were looking for ways of protecting the existing investments.
Simultaneously, the low rate of interest created a situation where the VC investors and the PE investors got more money suddenly. This availability of maximum capital is known as a dry powder in the private equity terminology. And this maximum availability of capital kept deals healthy in the PE/VC industry even through the 2020-21 crisis.
Decoding the Evolution of PE/VC Investments in India
During and even post-pandemic, the preferences and the appetites of venture capitalist and private equity investors changed. The global indications had a major impact on India, with the PE/VC ecosystem in India changing because of the changed preferences of the investors.
Here, we will try to understand the evolution of the PE/VC investments in India before and after the beginning of COVID-19.
ITES, Manufacturing, and Healthcare
The healthcare sector has become one of the most favoured sectors for investment after its crucial role during the pandemic. Data by IVCA/Bain showed that the usual size of a deal for investment in the healthcare sector of India was $194 million in 2019, which became $239 million in 2020.
In 2020, the average value of the deal of the healthcare sector compared with universal data was at its record high of $528 million, enhanced by 93% from 2019.
Coming to the heavyweights, such as the manufacturing and ITES sectors, they successfully retained their growth. The industries continued to catch the interest of the investors, with deal values of private equity in both the sectors increasing by 24% and 56%, respectively, in the year 2020.
These statistics completely match the global data as far as the manufacturing sector in India is concerned. However, there is a bit of disconnection when it comes to ITES. As per global data, ITES lost its shine among the investors, with the whole deal amount going down to $60 billion in 2020, a decline of 24% in comparison to 2019. Discretionary expenses became less because consumers were more focussed on savings because of the uncertain situation.
The Impact of Banking, Financial, and Insurance Sectors
Considering the inability of the financial, banking, and insurance sectors in matching liability and assets effectively, there has been major stress on the balance sheets of the BFSIs. The underperformance of these sectors is reflected in PE investments, with the BFSIs declining in both deal size and value.
With the economy normalising at a breakneck pace, you can expect India's PE/VC industry to grow in the near future. With India's mission of becoming a production hub, it's being envisaged that the PE/VC industry here will play an essential role in the space tech, semiconductors, and automotive sectors.