April 30, 2020
VCCEdge Reports Decline in Fundraising Post the COVID-19 Outbreak as Investors Cut Exposure to Riskier Assets
30th April, 2020, New Delhi, India: The investment scenario which was already dipping as India was faced with the conundrum of a slowdown prior to the COVID-19 outbreak, is now seeing a rapid fall as a result of the pandemic, as per the recent report by VCCEdge. There is a significant decline in the quantum of funds as wary investors are holding back due to the fallout of economies in coping with the crisis. According to VCCEdge, in 2019, while big ticket deals took place, the effects of the slowdown could be seen in terms of exits, wherein IPOs were at an all-time low facing a 68% Y-o-Y drop. Post the outbreak and during the lockdown, investments plummeted to a five-year low in terms of private equity (PE) investments, merger and acquisition (M&A) activity and funds launched. Funds launched and exits were most severely impacted registering a Y-o-Y decline of 67.4% and 43.1%, respectively.
Although there is a reduced appetite for risk amongst investors, slowing down funding activity, the silver lining is that investment opportunities continue to be seen in the healthcare, information technology, consumer discretionary and fintech sectors.
COMPARITIVE SECTOR-WISE DEAL ANALYSIS BY VOLUME: Q1 2019 - Q1 2020
The findings on VCCEdge show that 1,769 PE investment deals took place during the period starting January 2019 till date, amounting to just under $42 billion. Q3 2019 recorded the highest deal activity, while Q1 2020 saw a massive decline in comparison to all four quarters of 2019.
COMPARITIVE DEAL ANALYSIS BY VOLUME & VALUE: LAST FIVE QUARTERS
High deal activity in the first quarter of 2019 can be attributed to big ticket deals, particularly private equity deals which contributed to 46% of the total deal value recorded. Notable deals such as private equity investment of $3.6 billion in Tower Infrastructure Trust, $1.8 billion in Pipeline Infrastructure and $1 billion in One97 Communications drove investment value to its highest.
“Looking at life in a post-COVID world, social distancing will remain an imperative feature of the common man’s life; global and local travel will remain restricted and remote working will continue where needed. Increasing unemployment and reduced incomes would be a key challenge in front of the economy and will continue to be a looming threat. VCCEdge expects that fund raising will continue to take a hit since China is one of the largest sources of funds in India, particularly in the start-up ecosystem. Furthermore, international travel restrictions will limit fund raising”, said Sahaj Kumar, Head - Research, VCCEdge.
There is a renewed focus on the healthcare sector and investment opportunities such as hospitals, diagnostics, health-tech and additionally, relief funds are brimming. MedGenome was able to raise $55 million from investors in the healthcare diagnostics category in April 2020 and Axio Bio solutions raised $5.01 million in the medical supplies category in January 2020.
Shalil Gupta, Managing Partner - Research, VCCEdge, said, “By the fourth quarter of 2020, economies, government and corporates will start moving towards recoveries globally. The situation today brings to us more opportunities amid the pandemic as certain sectors will have to aggressively innovate and bring forward more value to business and consumers. The most prominent being healthcare, fuelled by the consequent need for healthcare supplies, diagnostics and hospitals; the IT/ ITes sector, with the growing need for complex infrastructures to support remote working, e-learning etc., while ensuring data security; and fintech, since customers will prefer using digital alternatives such as m-banking and online banking with social distancing likely to be the new normal in a post-COVID era."
Download the full report to view VCCEdge’s analysis on the impact of COVID-19 on fundraising.
VCCEdge is India’s most comprehensive research platform for Private Markets. VCCEdge enables and assists investors to make informed decisions, manage risk and achieve disproportionate returns through a process of quality and well researched data and insights, Since 2009, VCCEdge has helped investors via a large and quality repository of deals, trusted news and incisive analysis of Indian investments, M&A, venture capital, private equity, investment banking, public equity, and innovative business models. For more details, please visit www.vccedge.com.
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