Sector by sector breakdown
Healthcare
- While Healthcare dominated the PE buyouts space, we witnessed a decrease in deal volumes in H2 2020 (-38% compared to H2 2019)[1] driven by the pandemic’s impact on non-critical healthcare service delivery. However, the sector maintained its overall deal value ($1bn in H2 2020)[2] largely due to the buyout of J B Chemicals by KKR for $414m[3]
- Six of the eight completed transactions in H2 2020 were in pharmaceuticals, a stark contrast from 2019 (seven out of thirteen transactions)[4]. While the pharma sector is a relatively resilient and defensive sector, the positive sentiment towards Indian pharma companies was amplified by the pandemic as countries looked to diversify their supply chain concentration from China
- API, intermediates and CRAM segments are gaining significant traction as India is emerging as a preferred destination for manufacturing on the back of geo-political tensions, and the Indian Government’s policy to encourage domestic production[5]
- On the other hand, healthcare services businesses, which had seen volumes fall by 60-85%[6] during the lockdown, have started to show improvements as demand for elective surgeries increased. As overall volumes return to pre-pandemic levels, and hospitals continue to improve the margins, we expect an uptick in deal activity towards H2 2021
Source: Venture Intelligence Private Equity & Venture Capital Deals Database
Technology, Media & Telecom
- The number of deals in Technology, Media and Telecom nearly halved in 2020, down to 13 from the 23 in 2019 (see below), however there was only a 21% decline in deal value.[7] Deals in traditional IT services companies and software companies catering to specific sectors, such as financial services, were affected by the pandemic’s impact on their end clients
- Software-as-a-service (SaaS) valuations have surged in global markets, and PE valuations are following suit, as organisations’ digital transformation roadmaps have been accelerated by the pandemic. This was evidenced by Zenoti (SaaS) and Glance InMobi (Consumer content) entering the unicorn club [8]
- SaaS companies - building for global markets as well as for Indian markets - are seeing positive sentiment with Indian investors. As a result, we anticipate increased deal activity over the next few quarters as a slew of companies prepare to raise funds
- We expect greater deal activity in the IT Services space, especially involving a digital focus (e.g., cloud-based technology, digital transformation), as this trend continues
Source: Venture Intelligence Private Equity & Venture Capital Deals Database
Industrials
- Industrials witnessed similar activity in 2020 in comparison to 2019 [9]
- Logistics and supply chain services (digital and otherwise) contributed to c.50% of all transactions[10] as these segments see growing interest from private equity funds driven by the country’s growth in e-commerce. Innovative new-age companies solving various market inefficiencies, and improving productivity and cost-savings, has also led to significant investor interest in tech-logistics, with companies such as Ecom Express, Rivigo and Delhivery raising funds from sponsors[11]
- Speciality chemicals has also been in focus for investors looking for resilient sectors with high growth, as demonstrated by Everstone’s acquisition of Calibre Chemicals.[12] The sector has been favourably impacted as customers look to diversify their supply chains (China +1 strategy)[13]
- We expect that Industrials will see more buyout transactions driven by economic recovery and the discovery of resilient business models in 2021
Source: Venture Intelligence Private Equity & Venture Capital Deals Database
Consumer, Leisure & Retail
- Consumer, Leisure & Retail saw significantly fewer transactions in H2 2020 (37% decrease compared to 2019)[14],driven by the pandemic’s impact on consumer spending
- That said, there are some key areas of focus within the vertical: 70% of the deals completed in 2020 were in the consumer internet space, with a corresponding deal value of $1.6 bn[15]. Activity levels have dropped due to a reduction in large rounds of funding led by Softbank and regulatory headwinds for investments from China[16], but we expect that other investors may become more active in the consumer internet segment
- As more consumer companies scale up with the benefit of exponential growth of digital channels, and their subsequent ability to compete effectively with market incumbents, we expect businesses in personal care, food & beverages, lifestyle, etc. to receive increased interest from investors in 2021
Source: Venture Intelligence Private Equity & Venture Capital Deals Database
Financial Services
- Financial services saw a significant decline in transactions volume in H2 2020 – (-57%)[17] as transactions in the lending segment (NBFCs, microfinance etc.) took a severe downturn over concerns of asset quality
- As a result of the lockdown, offline payment volumes fell drastically and there was a sharp uptick in e-commerce, so companies enabling online payments were in focus during the year, driving the remaining completed transactions. Razorpay[18] was a direct beneficiary of this and attained unicorn status
- We expect capital raising transactions will recover strongly in 2021, as banks and other financial companies look to repair balance sheets after the full impact of pandemic related losses plays out. With the rapidly improving economic environment, we expect investors who were on the side-lines to commit larger rounds of capital to the fintech sector in 2021
Source: Venture Intelligence Private Equity & Venture Capital Deals Database
Services
- Within Services, EdTech received strong investor interest as the pandemic significantly accelerated the growth of online education - $700m being raised across eight transactions in H2 2020[19] with funding more broad-based then the first half of 2020[20]
- Traditionally, the K12 and test preparation segments within EdTech have been the focus areas. However, the lack of quality industry-focused education, and fast paced skill redundancy, has given momentum to the ‘continued learning’ space, evidenced by fundraising transactions of Eruditus and Springboard[21]. The National Education Policy 2020[22] has also provided a fillip to this by allowing universities to provide online degrees, thereby increasing access to quality education and increasing employability.
- We expect new segments and business models such as online tutoring for extracurricular activities, niche sector-specific education courses, vernacular learning tools, virtual reality etc., to emerge within EdTech that will continue to generate strong investor interest
Source: Venture Intelligence Private Equity & Venture Capital Deals Database
What to read next
References
[1] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[2] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[3] KKR to buy 54% stake in JB Chemicals for Rs 3,100 crore, Economic Times, 3 July 2020
[4] For this analysis, we have considered transactions with value between $15 – 500m and excluded some sectors (Infrastructure, Real Estate, Energy, Mining and Natural Resources)
[5] Government of India, Ministry of Chemicals and Fertilizers, Department of Pharmaceuticals, Scheme on promotion of bulk drug parks [Press Release]
[6] Industry analysis and research by DC Advisory
[7] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[8] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[9] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[10] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[11] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[12] Singapore-based Everstone buys controlling stake in Calibre for Rs 1,000 cr, Business Standard, 6 December 2020
[13] Laxmi Organic Industries Limited – Draft Red Herring Prospectus, 15 Dec 2020
[14] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[15] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[16] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[17] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[18] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[19] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[20] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database
[22] Ministry of Human Resource Development – National Education Policy, Government of India, 2020