PE/VC deals up 35% in 2018 to $35 bn on buyout, start-up investment pickup

The total of investments during 2018 by private equity (PE) and venture capital (VC) companies was $35.1 billion (nearly Rs 2.5 trillion), surpassing the previous high of $26.1 billion (Rs 1.8 trillion) in 2017 by 35 per cent.

This was on the back of significant growth in large deals, according to data from consultancy EY. Start-ups rebounded in 2018, attracting $6.4 billion (Rs 45,000 crore) or 83 per cent higher than in 2017.  

Among the PE/VC investments in 2018, as many as 12 deals were each of a value of $500 million or more. Eight were of over $1 billion (Rs 7,000 crore) each. This compares to a total of 11 such deals in the previous dozen years.

There were, in all, 761 deals as compared to 594 in 2017. The growth was led by a strong pickup in buyouts and start-up investment.

PE/VC exits recorded $26 billion in value, almost equal to those in the previous three years combined. At $9.8 billion, this was also true for the value of buyouts.

Vivek Soni, partner at EY, said volatility in the broader markets dampened private investment in public equity (PIPE) in the second half (the total for the year was $3.9 billion, a modest rise of three per cent) but this was more than adequately compensated by the rise in buyout and start-up activity. With the Walmart-Flipkart deal concluding successfully, there is renewed interest in the Indian start-up system and investors are more than keen to fund models driven by good management. Other mega-deals saw large VC investors SoftBank, Tencent and Naspers deploy significant amounts of capital. The previous high for start-up investment was in 2015.

Growth investment at $12.7 billion fell five per cent and saw its share in the total pie decline to 36 per cent, compared to over 50 per cent in prior years.

Soni expects the Indian PE/VC market to expand significantly in the longer term, it being at a nascent stage when compared to global markets. "We expect 2019 to also be a good year for PE/VC in India and even surpass the levels achieved in 2018, on the back of huge sums of dry powder of close to $40 billion (EY estimate) waiting to be deployed in India," he stated.

As the Indian market matures, PE/VC deals are becoming larger and more complex. There were 76 deals of a value greater than $100 million in 2018, aggregating to $25.9 billion and accounting for 74 per cent of total PE/VC investment. In 2017, there were 54 such deals, aggregating to $18.7 billion. The value and volume of large deals have been progressively increasing over the past five years. 

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