PE/VC investments touch all-time high of $9.5 bn in July

Investments by private equity and venture capital funds doubled to a record high of $9.5 billion in July mainly driven by higher investor interest in the e-commerce sector, a report said on Monday.

Private equity (PE) and venture capital (VC) investments stood at $4.1 billion in the year-ago period.

The activity was higher by 77 per cent when compared to June's $5.4 billion, the report on

monthly PE/VC investment activity by industry lobby IVCA and consultancy firm EY said.

The month recorded 19 large deals of over $100 million aggregating to $8.2 billion, compared to 10 large deals worth $3.1 billion in the year-ago period and 12 worth $3.6 billion in June 2021.

July 2021 was also a record in volume terms, as 131 transactions were announced, compared to 77 in the same month last year and 110 in June 2021.

Pure-play investments, excluding those in real estate and infrastructure, accounted for 96 per cent of all PE/VC investments in July 2021 at $9.1 billion, almost twice the value recorded in July 2020 ($3.8 billion) and June 2021 ($4.4 billion), the report said.

The e-commerce sector accounted for $5.8 billion of PE/VC investments, bringing the e-commerce total PE/VC investments year-to-date in 2021 to $10.5 billion, more than double the previous annual high.

"The positive response of the equity markets to the Zomato IPO has acted as a catalyst and almost all the leading e-commerce companies are now shoring up capital from investors (who are keen) and are making bolt-on acquisitions to bulk-up prior to hitting the capital markets," EY's partner Vivek Soni said.

Important enabling reforms like the performance-linked incentive (PLI) scheme and scrapping of the retrospective tax law will further strengthen investor sentiment, he said.

However, he cautioned that the downside risks include a possible pandemic resurgence, a potential spike in commodity prices especially oil, inflation and any hawkish action by the US Federal Reserve.

From 'exits' perspective, July recorded 22 deals worth $965 million which is much higher than the $134 million in July 2020, but 70 per cent lower compared to the preceding June's $3.2 billion, it said.

In terms of fund raising, there was a massive decline in July 2021, as only $226 million has been raised for future investments, as against $2.2 billion in July 2020.

Photograph: Dado Ruvic/Reuters