PE activity in H1 CY2021 at all-time high of $26 billion: PwC India Report

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Private equity investors pumped in $26.3 billion into India in H1 of CY2021 (January 1 - June 15), an all-time high, according to a report by PwC India titled “Deals In India: Mid-year review & outlook for 2021- Resilience and Recovery “.  This figure was 19 per cent and 25 per cent higher compared to private equity investments in H2 2020 and H1 2020 respectively.

The surge in deal activity was fuelled by billion-dollar buyouts and numerous large fundraising rounds by start-ups, boosting many of them into the unicorn club, the report added.

PE exits increased exponentially in H1 2021 at 5.4 times the exit value of H2 2020. Strategic sales accounted for 58 percent of the exit value in H1 2021 mainly due to two billion-dollar exits(Partners Group and the Canada Pension Plan Investment Board exited from GlobalLogic, and Abraaj Group and Alibaba exited from BigBasket). Improved liquidity and the recent rebound and remarkable performance of the Indian stock market helped the exit momentum.

“PE activity is primarily being driven by three sectors – technology, consumer and healthcare. Given the huge demand in the domestic market, there is a significant need for capital. Many of the investors have been able to make successful exits through IPO’s which has increased the supply side as these investors are now writing bigger cheque sizes,” said Dinesh Arora, Partner & Leader (Deals), PwC India.

The combined deal activity crossed $40.7 bn with 710 transactions during the first half of the current calendar year, a 2 per cent increase from H2 2020 in terms of value, according to the report.

According to Arora, some of the key themes emerging in 2021 due to the uncertainty of current times are ‒ a growing divergence in asset valuations, the acceleration of deals in digital and technology, and increasing attention toward environmental, social and governance (ESG) matters.

Following are some of the other themes outlined in the report:

Stricter foreign direct investment (FDI) norms have provided an impetus to India-based start-ups and helped them to grow and leverage the market. The COVID-19 pandemic has accelerated the adoption of digital technology across sectors and Indian start-ups are establishing and strengthening their presence in the new normal. The technology sector dominated the PE investments space with 16 start-ups entering the unicorn club in 2021 compared to nine in 2020. EdTech was the emergent sector as major players like Byju’s and UpGrad continued to raise funds.

H1 2021 was also marked by a few billion-dollar outbound deals, with the largest being Adani Green’s acquisition of SB Energy India ( holding company based in UK) for $ 3.5 billion, followed by Wipro’s acquisition of UK-based Capco at $ 1.45 billion. Excluding these billion-dollar deals, outbound activity amounted to $ 385 million across 26 deals.

The pandemic significantly impacted the resolution of stressed assets cases and led to operational challenges for parties involved in insolvency proceedings. Furthermore, the suspension of new proceedings under the IBC for almost a year slowed the resolution process. However, IBC activity picked up in May‒June 2021, with insolvency issues of the two large accounts of Jet Airways and Videocon Industries Limited were reportedly resolved in June 2021 by the National Company Law Tribunal (NCLT).