PE/VC inflows rise 131% to $9.5 bn in July
Important enabling reforms like the performance-linked incentive (PLI) scheme and scrapping of the retrospective tax law will further strengthen investor sentiment
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Investments by private equity and venture capital funds doubled to a record high of $9.5 billion, a 131 per cent growth, 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 $4.1 billion in the year-ago period. The activity was higher by 77 per cent when compared to June's $5.4 billion, the report on monthly PE/VC investment activity by industry lobby IVCA and consultancy firm EY said. The month 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. July 2021 was also a record in volume terms, 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 per cent 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. The e-commerce sector accounted for $5.8 billion of PE/VC investments, bringing the e-commerce total PE/VC investments year-to-date in 2021 to $10.5 billion, more than double the previous annual high. "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 said. 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. From exits perspective, July recorded 22 deals worth $965 million which is much higher than the $134 million in July 2020, but 70 per cent 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.
