India set to get more PE/VC investments

New Delhi: The mega liquidity unleashed by the US and European central banks, low yields and the declining dollar is forcing large LP's (limited partners or investors in PE firms) to increase their allocations towards higher yield generating and growing emerging markets - of which India will be a beneficiary, according to an EY Insights report.

Though, private equity and venture capital (PE and VC) investments in 2021 have gotten off to a slow start, with January-February 2021 investments being 11 per cent lesser than January-February 2020 and almost 66 per cent lesser than the previous two-month period Nov-Dec 2020, it is expected to pick up in a bigger way in coming months with most of the uncertainties that plagued markets in 2020 on the decline.

The report from EY 2021 trend book suggests that looking ahead the deal pipeline remains robust and investment teams of most large and medium sized PE funds are working flat out diligencing and negotiating multiple deals.

"In our view, the global macro has thrust the India investment opportunity in a favourable position and most PE/VC investors are inclined towards investing increased amounts in larger deals," the report said.

While there are still concerns on the possibility of a second wave, new mutant virus strains and the complexity of the vaccine rollout, most Indian corporates as well as investors seem to have a positive view, EY said adding that the government too has played its part well by way of an accommodative budget that is expected to spur growth on the back of increased govt spend and kickstart of the capex cycle.

The successful fund raising by the RIL Group entities from global PE and strategic investors during the peak of the pandemic has added a new dimension to India's attractiveness as a destination for global capital. Several large marquee global investors have made their maiden investments in India via the RIL Group deals and one can expect most of them to follow through with more investments as the Indian recovery picks up steam, the report said.