As the Covid-19 (novel Coronavirus) pandemic continues to spread impacting businesses globally, the funding scene in India is seeing a rapid decline. There is a significant fall in private equity (PE) funding in India after the Coronavirus outbreak, as wary investors are holding back their plans of funding due to the fallout of economies in coping with the crisis, says a report by VCCEdge, a data research platform, released on Thursday.
VCCEdge reveals that the amount of PE investments has declined across January, February, and March 2020 by 10.2%, 7.3%, and 40.3%, respectively, as compared to the same period last year.
The number of PE exits and M&A (mergers and acquisitions) deals also faced the same fate. PE exits took a hit of 58.6% and 65% in January and March 2020, respectively, with an exception of February 2020 having witnessed a rise of 111.1% from the corresponding periods in 2019. M&A activity in January, February, and March 2020 dipped by 25.7%, 16.3%, and 41.7%, respectively, from the corresponding periods in 2019.
According to the report, March has faced the major brunt of the pandemic, with PE investments and exits witnessing a drop of 57% and 100%, respectively, in terms of deal value from February 2020. On account of the prevailing uncertainty and economic slowdown brought about by the spread of Covid-19 and the lockdown implemented to curtail it, investors have held their investments and adopted a wait-and-watch approach, the report said.
On March 25, prime minister Narendra Modi announced a 21-day national lockdown to contain the spread of the virus. Later the lockdown was extended till May 3.
According to VCCEdge, the number of funds raised during the first three months of this year fell 48%, while the number of investments was down by 83% and total capital invested dropped 85% as compared to the first three months of last year.
However, due to the Coronavirus outbreak, there is a renewed focus on the healthcare sector and investment opportunities in hospitals, diagnostics, and health tech. Genetic diagnostics and research company MedGenome raised $55 million in a funding round led by LeapFrog Investments, a global impact investment firm, in April. Existing investors Sofina and Sequoia also participated in the round. Axio Biosolutions raised $5.01 million in the medical supplies category earlier this year.
In the technology space, investments in e-learning software and platforms are becoming increasingly attractive, as schools and colleges implement social distancing with grave importance.
This year alone, Bengaluru-headquartered Byju’s raised about $500 million at an estimated valuation of close to $8 billion. In February, Unacademy raised $110 million in a funding round led by Facebook and General Atlantic.
The report further said fundraising will continue to take a hit, since China is one of the largest sources of funds for Indian companies, particularly in the startup space. International travel restrictions will further restrict fundraising as well.
However, various investment opportunities will also surface despite the severe hit to the investment ecosystem. Certain sectors are still providing lucrative investment opportunities, the most prominent being healthcare, IT/ITeS, and fintech. “Investments in fintech companies will drastically increase due to this pandemic since customers will prefer using digital alternatives such as m-banking and online banking,” the report added.