Realty, infra sectors drive buyouts deals to a record high in 2019

Industry: ,    January, 2020

Buyout deals dominated private equity (PE) and venture capital (VC) investments in India last year, hitting a record high in both volume and value.

In 2019, there were 58 transactions worth $16.2 billion, compared with 49 transactions worth $10.4 billion in 2018, which was the previous record, according to a report by the Indian Private Equity and Venture Capital Association and consulting firm EY.

In terms of overall investments, which also touched a record high of 1,037 deals worth $48 billion, buyout transactions held the largest share among PE/VC deals, compared to about 28% share in the previous year.

The growth in buyout deals was driven by the real estate and infrastructure sectors, which saw a 180% increase in value and 123% increase in the number of buyouts, compared to the previous year.

The same trend, however, did not hold true for buyouts in the traditional PE/VC space, which saw a 26% decline in value and 19% decline in the volume of deals in 2019, compared to the preceding year.

Source: EY
Source: EY

Growth capital investments, the second most preferred transaction type, grew 9% to $14.5 billion in 2019 on a year-on-year basis. The growth-stage deals were also driven by a spurt in growth investments in infrastructure and real estate sectors, which rose by 136% to $7.3 billion in 2019, compared to the previous year.

Here, too, pure play PE/VC growth capital investments witnessed a decline of 26% in terms of value and 13% in terms of volume, compared to 2018.

Startup investments also broke records in 2019, and were the highest ever in terms of value at $7.9 billion.

The primary contributor to the increase in startup investments was SoftBank’s $810 million infusion into Oyo (Oravel Stays Pvt. Ltd), which was also the largest startup deal in 2019.

In terms of sectors, infrastructure, accounting for investments worth $14.5 billion, contributed to 30% of all investments by value in 2019, compared to 12% in 2018, and more than the investments of the previous seven years combined.

The largest deals during the year included Brookfield’s buyout of Reliance Jio’s tower arm for $3.7 billion and Reliance Industries Ltd’s East-West pipeline for $1.9 billion. Brookfield-Reliance Jio‘s tower deal was also the largest ever in the Indian PE/VC industry.

Of the total investments, 111 large deals (of a value greater than $100 million) were recorded in 2019, aggregating to $35.2 billion, comprising 73% of total PE/VC investments, compared to 81 large deals worth $27.9 billion in 2018.

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