IPOs, ECMs grow while M&A, PE decline in H1 2020: Report

NEW DELHI: A slump in the Indian deal ecosystem began with the global slowdown and as the market started to recover, the COVID-19 pandemic stormed in with a huge blow. Despite the grave impact, IPOs have contributed 40.9% to the overall deal activity in the Indian deal ecosystem, according to a report.

As per VCCEdge research insights, the quantum of new fund vehicles launched this year was down by 67%. The targeted capital also witnessed a 91% fall on a Y-o-Y basis. On the brighter side, big-ticket deals contributed to the deal ecosystem growth in 2020. Because of big-ticket deals, Equity Capital Market (ECM) witnessed 2.19x growth and PE deals contributed 48% to the total deal value. The ECM witnessed a five-year high in terms of deal value by recording the highest deal value of $13.05 billion in H1 2020. In terms of count, industrials, financials and consumer discretionary are the top preferable sectors for ECM deals in H1 2020.

Shalil Gupta, Chief Business Officer, Mosaic Digital, said in a statement, “PE and M&A deals dropped from 682 to 580 deals and 487 to 306 deals respectively. We noticed that the second quarter of the reporting period reflects a different story for PE Investments. The deal value increased from $7.53 billion to $12.57 billion (67% increase Q-o-Q), and deal activity declined from 348 deals to 286 deals (18% decline Q-o-Q), for the same period last year. India is going through a serious stage of COVID-19 and the M&A deal ecosystem will continue to be impacted until the pandemic vanishes. The deal activity is expected to gradually stabilize Q3 onward as the lockdown gets lifted.”

Most PE investors preferred to put their investments on hold due to unfavourable market conditions. The reporting period witnessed 66 PE deals worth $2.39 billion, a five-year low both in terms of volume and value. Although Venture Capital deals contributed to 34% of the total deals in H1 2020, the number of deals fell by 30% compared to the same period last year.

Sahaj Kumar, Head – Research, VCCEdge, said in a statement, “After a marvellous 2018, the downturn that began in 2019 has continued till H1 2020. If you look at the number of deals, the pattern of 37% drop continues. However, the value of deals recorded a marginal decrease of almost 4% on a Y-o-Y basis. Amidst the pandemic, Information Technology and telecommunication services have been the top-performing sectors attracting maximum deal value.”

IPOs, ECMs grow while M&A, PE decline in H1 2020: Report IPOs, ECMs grow while M&A, PE decline in H1 2020: Report Reviewed by TechCO on 8/07/2020 Rating: 5

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