According to the IVCA-EY monthly PE/VC roundup, May 2021 saw investments totaling US$3.6 billion across 60 transactions, with nine large deals worth US$2.7 billion. Exits totaled US$12 billion across 18 transactions, with three strategic exits totaling US$10.4 billion.

Report by Industry lobby IVCA and consultancy firm EY says that on a year to date basis venture investments by these two types of investors have more than doubled to $20 billion for the first five months of 2021.

It can be noted that the country has been suffering from the effects of the pandemic's second wave since April of this year. In May 2021, there were localised lockdowns across the country, but despite the national lockdown, $4.6 billion was invested in Jio Platforms in May 2020.

PE/VC investments were 33% lower in May 2021 (US$3.6 billion) than in May 2020 (US$5.4 billion) and 52% lower than the previous month (US$7.5 billion in April 2021).

Growth investments were the largest deal segment in May 2021, with US$2 billion recorded across 20 deals (US$4.9 billion across 13 deals in May 2020), a 59 percent decrease year on year. The significant increase in the value of growth investments in May 2020 was due to the investment of US$4.6 billion in Jio Platforms.

The number of transactions in May 2021 was the same as in May 2020, but 14 percent lower than in April 2020. (60 deals in May 2021 vs. 60 deals in May 2020 vs. 70 deals in April 2021).

Vivek Soni, Partner and National Leader Private Equity Services, EY said, “May 2021 recorded PE/VC investments of US$3.6 billion, significantly lower than levels seen in April 21 (US$7.5 billion) and March 21 (US$5.4 billion). Notwithstanding this dip in May 2021, on a YTD basis, PE/VC investment trends remain bullish. In the first five months of 2021, PE/VC investments have surpassed US$20 billion, almost twice the value recorded in the same period last year. It is clear that PE/VC investors are now able to price in COVID-19 associated risks better than they were in April / May 2020. This revival in PE/VC investments has been driven by a record increase in investment value in ‘COVID resilient’ sectors like e-commerce (US$4.3 billion), technology (US$3.8 billion), pharma (US$1.4 billion), media and entertainment (US$1.2 billion), education (US$885 million), healthcare (US$801 million) as well as a revival of PE/VC investments in financial services (US$3.1 billion). We expect this ‘polarisation’ of investments to continue till the outlook on pandemic-related lockdowns and disruptions changes materially.

PE/VC exits have also kicked into high gear in 2021, with May 2021 recording the second-best month ever with US$12 billion in exits. As a result, with US$19.3 billion in exits in the first five months, 2021 has emerged as the second-best year for PE/VC exits after 2018. This is more than three times the total exit value recorded the previous year.

“Strategic exits have been the biggest driver of this rise, recording US$12.7 billion so far as large well-funded corporates are taking advantage of the current environment to consolidate businesses/and or acquire online capabilities to enhance the value proposition of their existing brick and mortar businesses. We expect capital markets driven exits to increase meaningfully as a number of Indian ‘unicorns’ follow up on their IPO plans. Equity markets reaction to these maiden listings will be a bell-weather event for the Indian start-up eco-system and could potentially fire up more investments as well as exit activity in 2021 and 2022,” says Vivek Soni.

As COVID infections decline in developed countries and vaccination rates rise, the outlook for global trade and commerce improves. Lockdowns are being gradually eased in India as well, raising hopes that the economy will recover.

Investors will be closely watching the Government’s preparedness to avert/deal with a possible third wave, better vaccine rollout, and the impact of the pandemic on the country’s macro and fiscal health in the coming months. The rise in global inflation, its impact on commodity prices, and the Fed’s reaction to rein in inflation may emerge as a key macro risk for India,” he added.

In May 2021, the real estate and infrastructure asset class received over US$1.1 billion in investments, a significant increase from US$5 million in May 2020 and US$644 million in April 2021, on the back of the large Blackstone-Embassy Industrial Parks deal worth US$715 million.

Real estate led the way with US$916 million in investments across four deals, owing primarily to the US$715 million Blackstone-Embassy Industrial Parks transaction, followed by financial services with US$818 million in investments across nine transactions.

May 2021 saw nine large deals worth US$2.7 billion, compared to five large deals worth US$4.9 billion in May 2020 and 15 large deals worth US$6.1 billion in April 2021.

Pharmaceuticals came in second, with US$733 million invested across three deals, and e-commerce came in third, with US$305 million invested across eight deals.

Exits in May 2021 totaled US$12 billion, nearly 42 times the value of exits in May 2020 (US$286 million) and nearly four times the value recorded in April 2021 (US$2.7 billion). This is the second-highest monthly value of exits, following the US$16 billion recorded in September 2018 as a result of the Flipkart-Walmart transaction.

The report added that the capital markets-driven exits will increase significantly as a number of Indian "unicorns" such as Zomato and Paytm follow up on their IPO plans.

May 2021 saw total fundraises of US$154 million, up from US$50 million in May 2020, when COVID-19 was uncertain. Motilal Oswal raised US$89 million in the first close of its fifth real estate fund in May 2021, which was the largest fundraise.