Despite the $11.7 billion raised by Reliance Industries Ltd (RIL) through stake sales, venture investments in 2020 have declined by a fifth to $28.9 billion till September, consultancy firm EY said in a report on Thursday.
Since mid-March, coronavirus infections started getting reported in the country, which has now become the second highest globally in terms of numbers.
The lockdowns severely dented economic activity, leading to a 23.9 per cent contraction in the gross domestic product (GDP) for the April-June period and expectations of a 9.5 per cent contraction by the Reserve Bank of India (RBI) for 2020-21.
Excluding the investments in Jio Platforms (RIL's telecom arm) and Reliance Retail Ventures, investments by private equity (PE) and venture capital (VC) funds for the January-September 2020 period have declined 53 per cent to $17.2 billion, the lowest in four years, EY's partner Vivek Soni said.
He expects the Indian PE/VC investments to close the year at around $24-28 billion, excluding the bets in Reliance arms.
From a deal count perspective, the number of transactions came down to 686 in January-September 2020 as against 764 in the corresponding period last year.
Last year's favourite sectors like infrastructure, real estate and financial services have witnessed significant decline in investment flow, while essential goods and services like pharma, telecom, digital technology and education technology have received a major chunk of investments, the firm said.
Real estate and infrastructure companies had garnered investments of $16.1 billion, accounting for 44 per cent of the overall investments last year, and the same has come down to $2.9 billion this year, it said.
Telecom was the top sector with a 10-fold increase to $10 billion invested across 13 deals, followed by financial services at $4.1 billion in 114 deals (a 32 per cent decline), technology with $2.3 billion invested across 106 deals (decline of 30 per cent), and a five-fold increase in pharmaceuticals with $1.9 billion invested across 27 deals.
While all the deal segments reported a decline, buyouts were the worst hit, being 79 per cent down at $2.9 billion during the nine-month period which is lowest in three years.
With valuations impacted significantly, exits by the PE and VCs have also slowed, more than halving to $3.6 billion and are expected to remain muted for a considerable amount of time, it said.
Fundraising by such dedicated funds also nearly halved to $4.4 billion as the limited partners were focused on managing their larger public market portfolios and restricted their new commitments to tried and tested funds only, it said.