PE/VC investments in Feb slip to 24-mth low

New Delhi: Private equity and venture capital investments recorded a 24-month low of $1.7 billion in February this year, primarily on account of significant decline in large deals, says an EY report.

According to the IVCA-EY monthly PE/VC roundup, uncertainty over the impact of COVID-19 is expected to act as a significant headwind to Indian PE/VC investments. The rapid spread of the pandemic over the past 30-45 days has spiked business risk premiums, which has already led to significant downward correction in capital markets around the world, which in turn has impacted fund inflows.

Further, travel restrictions and inability of people to meet face-to-face is expected to delay work-in-progress deals and limit the number of new deals from being struck, the report said. "After a good start to PE/VC investments in 2020, both investment and exit activity have declined considerably in February 2020. The decline in value of PE/VC investments is primarily on account of the number of large deals (over $100 million) going down substantially," said Vivek Soni, Partner and National Leader - Private Equity Services, EY India. There were five large deals worth $700 million in February 2020 compared to nine deals worth $2.0 billion last year and five deals worth $1.4 billion in January 2020. "This is the lowest aggregate value of large deals in over 19 months. The largest deal announced in February saw General Atlantic invest $200 million in BYJU'S, an edtech company, followed by Warburg Pincus' investment of $150 million in Apollo Tyres Limited," the report said.

Soni further said that besides the coronavirus scare, domestic issues concerning taxation policies impacting InvITs and REITS and lingering issues over the financial health of some of our domestic banks and NBFCs, will act as sentiment dampeners, potentially slowing down large ticket PE/VC investments in the short term.