PE-VC investments closed 2018 at record high of $33 billion

Chennai: Indian startups ended 2018 at an all-time high, as total value of Private Equity (PE) and Venture Capital (VC) investments in 2018 clocked a record amount of $33.1 billion. Data from research firm Venture Intelligence showed a 36% increase in

PE-VC investments

during 2018 across 720 deals, compared to $24.3 billion invested across 734 deals in 2017. The country’s startup ecosystem entered a state of maturity in 2018, as investors were more selective with deals, but made higher value bets. There were 81 investments valued at $100 million or more in 2018, making up 77% of the total value.

This tally stood at just 47 transactions in 2017. Among these 81 deals, 40 were larger than $200 million each, compared to just 30 such investments in the year ago period, as per Venture Intelligence data. The eventful year also saw eight startups across the B2C and B2B sectors, such as Oyo, PolicyBazaar, Swiggy, Byjus, BillDesk, Freshworks, Paytm Mall and Udaan.com, enter the elite unicorn club.

While historically, deal announcements are subdued at the year-end, Venture Intelligence data showed that December 2018 alone saw 43 deals valued at $3.2 billion, almost double the value of investments raised in the same period last year.

“The mid-year Walmart-Flipkart deal clearly re-energized international investors’ appetite for mega bets in Indian internet & mobile companies,” Ärun Natarajan, founder, Venture Intelligence, said. “This has helped offset slowdown in investments in sectors like financial services, manufacturing and infrastructure towards the year end triggered by nervousness in the public markets and the IL&FS scare,” he added.

The year brought about an inflection point for the PE-VC industry in terms of exits as well. Value of exits achieved by investors during the year stood at $25.4 billion- a 78% increase from the exits clocked in 2017.

In line with previous years, IT and IT-enabled services companies accounted for close to 33% of the investment pie, thanks to Swiggy’s $1 billion raise in December from Naspers and others, and Oyo closing a $1 billion raise from SoftBank Vision Fund and others. Other large ticket IT & ITeS investments in 2018 included the $300 million attracted by online payment gateway service BillDesk from Temasek and others, $236 million raised by insurtech startup PolicyBazaar, and $410 million raised by Zomato. Financial services companies attracted 72 investments worth $5.9 billion, led by the HDFC and Star Health Insurance raising over $1 billion each. Vivek Soni, Partner and National Leader for Private Equity Services, EY India, expects 2019 to “potentially even surpass the levels achieved in 2018,” as close to $40 billion of dry powder (as per EY’s estimates) is available to be deployed in India. “This view is subject to any potential spike in political and policy uncertainty, should the 2019 general elections result in a fractured electoral mandate,” Soni added. Venture Intelligence’s Natarajan agrees. “Whether the PE investment tally of 2019 can outdo the highs of 2018 seems set to hinge substantially on global economic trends in the new year and the outcome of the upcoming national elections,” he said.