PE exits pick up momentum with nine IPOs

Private equity (PE) exits have picked up momentum in 2021 with exits worth $4.2 billion, which is 70 per cent of the total value recorded last year.

According to the IVCA-EY monthly PE/VC roundup, on a year-on-year (YoY) basis, exits doubled in terms of value in 1Q21 ($4.2 billion versus $1.9 billion in 1Q20) and were higher by 81 per cent compared to 4Q20 ($2.3 billion). The number of exits in 1Q21 (56 exits) were 54 per cent higher compared to 1Q20 (37 exits).

Vivek Soni, Partner and National Leader, Private Equity Services, EY, said PE/VC exits have picked up momentum in 2021 with exits worth $4.2 billion, which is 70 per cent of the total value recorded last year. 1Q21 has recorded nine PE-backed IPOs which is the highest quarterly number so far.

“Should the mid-cap/small-cap indices remain buoyant and not become volatile, we expect to see many more PE-backed companies hitting the capital markets this year, given the healthy appetite for primary issuances. As of now, there are over 90 IPOs that have filed their DRHPs with SEBI of which more than 45 are PE-backed,” he added.

Soni said that e-commerce has emerged as a new IPO intense sector wherein six companies have filed their DRHPs, including Zomato, Nykaa and Grofers.

“If these companies see favourable investor interest, we could see follow through from a significantly higher number of companies from the e-commerce sector,” he added.

This is in line with the global trend of startups going the IPO route; in 2020, US exchanges hosted 120 VC-backed IPOs worth a combined value of $259.8 billion.

Notwithstanding the encouraging build up in PE/VC investment and exit activity in 1Q21, the second wave of Covid-19 infections is surging in India as well as globally.

New variants of the virus and slow vaccine rollout are raising fresh concerns as many governments/local authorities are imposing mini-lockdowns, which could endanger the recovery underwriting thesis. Investors could turn cautious till more clarity emerges on government response to the second wave, Soni said.

According to the IVCA-EY monthly PE/VC roundup, the Jan-Mar period recorded investments worth $8.3 billion across 266 deals, on the back of 22 large deals worth $4.8 billion. Exits recorded $4.2 billion across 56 deals, with nine PE-backed IPOs.

“After the flurry of mega deals towards the second half of 2020, there has been a marked decline in large deals in 1Q21 with just 22 large deals aggregating S$4.8 billion vs 30 deals worth $16 billion recorded in 4Q20. Likewise, the number of buyouts have also reduced significantly with 10 buyouts worth $1.1 billion in 1Q21 vs 21 buyouts worth $8.9 billion in 4Q20,” Soni added.