Indian investments grew by 96% over 2020; consumer tech and IT sectors saw investments of upto $44 billion, as per the report.
Being one of the investors’ favourites in the year 2021, IT/ITES enterprises pocketed investments of $14.2 billion in the year, in a monumental jump of over 255 per cent as compared to last year. The Indian private equity market reached new heights in 2021, with record deal activity and a corresponding acceleration in exit momentum, with investments reaching a record high of $70 billion and transaction volume (number of deals) increasing by 87 per cent over 2020, as per a new report from consultancy firm Bain and Company.
According to the report, the year 2021 was a heated one for investors and entrepreneurs alike in the country, with over 2,000 recorded deals, and a 96 per cent jump in investments over the previous year, that too excluding the mega deals of Jio Platforms and Reliance Retail. The growth in total deal value has been mostly driven by deal volume expansion, with only a minor contribution from deal size expansion, the report argued.
The rapid expansion of the Indian equity market, combined with heavy capital flight away from China owing to political uncertainties in the country along with the ongoing COVID-19 wreaking havoc, the report points out that the conglomeration of such factors helped India boost its share of the entire Asia-Pacific (APAC) market, indicating a promising trend that is projected to continue in the years to come.
As far as the large cheque size investments are concerned, these also saw an exponential rise with roughly 11 deals worth more than $1 billion, as compared to only 6 in 2020. Flipkart, Hexaware, and Mphasis were among the firms on which large bets were placed. (Credit: Pragati Srivastava) Apart from that, consumer tech and IT/ITES accounted for a large proportion of deal activity in the year 2021, indicating the tech and Internet industries’ growing share of investment growth. The two sectors together accounted for about 60 per cent of the year’s deal value, or nearly $44 billion, which is higher than the total investment value for 2020.
Being one of the investors’ favourites in the year 2021, IT/ITES enterprises pocketed investments of $14.2 billion in the year, in a monumental jump of over 255 per cent as compared to last year.
According to the Bain and Company report, the sector’s appeal among investors has increased manifold due to several post-COVID shifts in corporate operations, the necessity for business continuity in unpredictable times, and the desire to switch to digitally-enabled models focused on increasing unit economics. In what was yet another positive observation from the Indian IT sector, the sector emerged as an investor’s favourite for buyouts and also witnessed great exits by top investment funds, in a trend that many believe will continue given the Indian IT sector’s growing popularity.
“Indian IT is increasingly courting billion-dollar-plus deals, and the deal size and count is expanding with significant deals taking place in the sector in the last few years. While the valuations are tempering, deals in 2022 indicate that the sector will continue to get PE attention as Indian IT firms continue to demonstrate excellence,” pointed out Sriwatsan Krishnan, a co-author of the report, talking about the Indian IT sector. (Credit: Pragati Srivastava) Another intriguing finding of the Bain and Company report was that environmental, social, and corporate governance (popularly known as ESG) factors were becoming increasingly important to investors when making investment decisions. The report says that Indian funds expect ESG concerns to account for 90 per cent of their private equity assets under management (PE-AUM), up from 39 per cent just five years ago. While, private equity’s adoption of ESG is considered a vital step toward the country’s Net Zero and Responsible Investing goals, with this finding it can be argued that ESG is now also getting increasingly recognised for its role in generating private equity value.
In what was yet another positive observation for the year 2021, the report suggests that over $36 billion worth of exists were unlocked in 2021, nearly quadrupling from previous year’s exits totaling $9 billion. Departure sizes increased at an even faster rate than exit volumes, with high recorded exit volumes worth more than $100 million, nearly tripling in value and exit sizes expanding across industries. Exits from the public markets also reached upto $11 billion, up from $7 billion last year, thanks to a 95 per cent increase in the average value of withdrawals via the public market […]
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