Aggregate annual PE deal value has doubled, count up over 60% in last 5 yrs

Private equity investing in India has come of age, with investments across sectors and maturity cycles of companies. 

In its India analysis of over 1,900 investments and 500 exits between 2015 and 2020, KPMG indicates that the aAggregate annual deal value has doubled and annual deal count has risen by over 60 per cent. With the exception of sectors like telecom and utilities, PE investments have outperformed capital markets with an average IRR of 29 per cent (Analysis based on select set of 300 exits between 2015 and 2019)

The report stated that investors' confidence in India continues to remain high. With the Indian economy expected to emerge as the third largest by 2030, investors have earmarked significant capital to actively participate in the India growth story, driven primarily by the sizable market, inherent cost advantage and young talent pool.

Especially in the last 5 years, investors have made multi-billion dollar investments across the growth lifecycle and sectors, with consumer goods, financial services and e-commerce leading the pack.

KPMG analysis of select 300 transactions between 2016 and 2020 indicated that returns on private investments have out-performed public markets, across sectors, underpinning the importance of investor led intervention in helping the company enhance its valuation, whilst navigating critical challenges or competitive pressures.

Whilst successful investments that add value to the portfolio, help PEs and VCs differentiate themselves and raise future capital, lack of alignment with founder promoters, management or forced value additions, can be counterproductive and erode investor’s brand equity.

The ongoing pandemic has only tested the relationship between PEs and their portfolios, with those who have reposed confidence in the management teams and accelerated the transformation journey (control costs, minimize supply disruptions, digitize customer journeys, facilitating funding lines) emerging as investors of choice in the market. 

Vikram Srinivas, Partner, M&A Consulting, KPMG in India said “Though there is no single play-book on how a PE should manage its portfolio, in a competitive deal environment, what differentiates the best-in-class is their ability to bring in operational expertise, have an eye on the prize - five years ahead and become catalysts of growth to achieve that desired end-state’