Billionaire Mukesh Ambani’s stake sales in Jio Platforms helped lift an otherwise tepid venture investments activity in May, taking the overall inflows to $5.4 billion as against $935 million in April.
The investments have nearly doubled as compared to last year’s $2.8 billion, and the biggest deal recorded during the month was buyout major KKR’s $1.5 billion investment in Jio, consultancy firm EY said in a report.
At $4.6 billion, the investments in Jio Platforms accounted for 85 percent of the overall investments by private equity (PE) and venture capital (VC) funds, EY added.
Its partner Vivek Soni said when adjusted for Jio’s marquee deals, the PE/VC investment activity is on a “downward spiral“, but the deals in the largest telco helped highlight investor confidence in the India story.
The overall number of investment transactions by PEs and VCs stood at 58, which resulted in the investments of $5.4 billion in May.
After telecom, life sciences sector witnessed deals of $354 million, Soni said, adding that this is on expected lines, wherein defensive sectors will start getting attractive for investors.
On exits front, the financial services sector recorded the highest value of exits as investors looked to book some profits in listed securities after the recent recovery in the equity indices, it said.
PE firms acquire businesses with the intent to exit at a higher equity value than was initially invested. Some of the most common PE exit strategies are: trade sale, initial public offering, and secondary buyout.
The financial sector accounted for 60 percent of the 11 exit deals worth $286 million announced during the month, it said, adding that the same is an increase of 2.4 times as compared to April, and a 24 percent decline from the year-ago period.
“Given that the curve of COVID-19 cases is yet to flatten decisively in some zones that account for a large part of the country’s economic activity, the virus will continue to remain a major headwind that both the government and private enterprises will need to tackle in the near future till such time a definitive cure is found,” Soni said, presenting a sombre outlook.
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