Alternative asset fund managers have returned $38.7 billion in 2021 by exiting 229 deals. Exits through secondaries hit $12.9 billion, signalling a deepening of an alternate asset market in India
“No one wants to hear our traditional deals, all that the bulge-bracket private equity (PE) funds and even sovereign funds want to hear is whether we have a tech deal,” rues a managing director of an investment banking firm in Mumbai, who’s returned to office after a year-and-a-half. Tech deals are undoubtedly the flavour of the season and everyone wants a share of that pie.
But it is not just the investments that have caught the attention of fund managers. What has set the ball rolling is the ability to return capital from India, which was, till five years ago, a sticky subject of conversation for foreign capital providers.
This year is turning out to be one of the record years for exits for PE and venture capital (VC) funds in India. According to a data sheet from EY Analysis, fund managers have managed to return $38.7 billion to their investors across 229 deals since January to October. In its best year in 2018, they had returned $27 billion to its limited partners (LPs) across 176 deals. Limited partners are investors who provide capital to PE and VC funds.
Investments in India are at a record high with $65.6 billion worth of capital being deployed by fund managers across 1,056 deals and exits are the ripple effects of the same. However, one cannot overlook the fact that even in the pandemic year of CY20, they deployed $47.58 billion across 923 deals; exits stood at mere $5.98 billion across 150 deals. Even during CY19, when capital was flushed in the Indian subcontinent with general partners (GPs) deploying $46.55 billion across 1,029 deals, exits stood at $11.12 billion via 157 deals. GPs are fund managers of PE and VC funds who deploy capital.
“The quantum of exits that is happening in India is a telling sign of maturity in the deal environment. Funds who were earlier reluctant to sell have realised that the hyper growth phase of startups is stretching and in some cases, it is exceeding the fund life of one fund… there is acceptance now that you can sell and exit,” says Vivek Soni, partner and national leader for PE services at EY.