PE investments fall to $3.6 billion in May

Private equity and venture capital investments more than halved to $3.6 billion in May 2021 when compared to the preceding April's $7.5 billion and a third lower than the year-ago period's $5.4 billion, a report said on Monday.

However, on a year to date basis, the venture investments by these two categories of investors have doubled to $20 billion for the first five months of 2021, the report by industry lobby IVCA and consultancy firm EY said, stressing that investors continue to remain bullish.

It can be noted that the country underwent the ravages of the second wave of the pandemic since April this year.

There were localised lockdowns across the country in May 2021, while there were $4.6 billion in investments in Jio Platforms in May 2020 despite the national lockdown.

"Investors will be closely watching the government's preparedness to avert/deal with a possible third wave, better vaccine rollout and the impact of the pandemic on the country's macro and fiscal health in the coming months,” EY partner Vivek Soni said.

He flagged the rise in global inflation, its impact on commodity prices and the US Fed's reaction to rein in inflation as the key risks for India.

The report said the surge in deal activity in 2021 is led by “COVID resilient sectors” like e-commerce (which has received $4.3 billion in investments), technology ($3.8 billion), pharma ($1.4 billion), media and entertainment ($1.2 billion), education ($885 million) and healthcare ($801 million).

“We expect this 'polarisation' of investments to continue till the outlook on pandemic related lockdowns and disruptions changes materially,” Soni said.

From a deal numbers perspective, the 60 transactions in May 2021 were almost at par with the year-ago period, but lower than the 70 recorded in April.

The real estate and infrastructure investments at over $1 billion helped the overall deal number in May, as pure-play PE and VC deal investments were down 54 per cent at $2.5 billion.

From an exits perspective, May 2021 recorded divestment of $12 billion to emerge as the second-best month till date, it said, adding that capital markets driven exits will increase meaningfully as a number of Indian 'unicorns' like Zomato and Paytm follow up on their IPO plans.

Total funds in May came at $154 million compared to $50 million of May 2020, and included Motilal Oswal raising $89 million in the first close of its fifth real estate fund.