Coronavirus: E-commerce, SaaS and healthcare to attract more PE funding, says report

KEY HIGHLIGHTS

• Digital entertainment, fresh e-commerce, telemedicine and remote work sectors are set to attract PE players during coronavirus times

• PE investment in H1 of 2020 could slowdown

• India saw record PE investment of $45 billion from 1,053 deals in 2019

It's not hard to imagine a future where non-essential contact will be minimal as a result of the global pandemic COVID-19. As macroeconomics evolve, the world is embracing uncertainty and also near-term recession shock. Bain and Co's 'India Private Equity Report 2020' says that behavioural changes including increased time spent on digital productivity and digital leisure could lead to increased funding activity in select sectors. "Based on global financial crisis (GFC) experience, deals invested during or after a downturn tend to do well. The market disruption caused by COVID-19 will likely lead to growth in select pockets such as e-commerce, enterprise technology/SaaS, healthcare, on-demand services and create investment opportunities," said the report.

While India is beginning to see the impact of COVID-19, with major import and export destinations impacted as well as the stock market, investors in the near-term are likely to take a stock check of their portfolio companies to understand the impact and determine suitable actions for portfolio companies. That is the reason why portfolio company CEOs will now need to take immediate steps to ensure business continuity and plan for value creation to retool their businesses for the future, said the report.

However, from an investment perspective, the first half of 2020 is likely to see a reduction in the investments by private equity players alongside a price correction across the board. "Investors could act differently according to types of industry consumption patterns to minimize the COVID-19 impact," it said.

Interestingly, in 2019, India stood as the second largest market to attract private equity deals in the APAC market. According to the report, record investments were made in the country, the highest in the last decade, to the tune of $45 billion from 1,053 deals during the year. "Investment value was about 70 per cent higher than 2018 and nearly 110 per cent higher than the previous five-year average. From a sector perspective, real estate and infrastructure, telecom, IT and ITES, and BFSI contributed more than 90 per cent of the growth in investment value," said the report.

However, the share of top 15 deals dropped to 35 per cent of total investment value in 2019, which is slightly lower than last year, when the top 15 deals made up almost 40 per cent of the total value.