PE/VC investments touch all-time high of $9.5 billion in July: Report

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  $5.4 billion during June as compared to $4.1 billion in the year ago period, an increase of 77%, said the report on monthly PE/VC investment activity published by industry lobby Indian Venture and Alternate Capital Association (IVCA) and consultancy firm EY. The month also 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.

E-Commerce sector witnesses massive growth

The e-commerce sector accounted for $5.8 billion of PE/VC investments, bringing the sector’s total investments to $10.5 billion in 2021, which was more than double as compared to the previous year.

“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 added.

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.

Pure play investments and volumes inclines while fund raising declines

July 2021 also saw a record in terms of volume, 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% 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.

From ‘exits’ perspective, July recorded 22 deals worth $ 965 million which is much higher than the $ 134 million in July 2020, but 70% 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.