The COVID-19 crisis has opened up significant opportunities for private equity (PE) firms to clock buyout and distressed deals at attractive valuations in India.
“An increasing number of investors are now scouting specifically for buyout opportunities keeping in mind the pros and cons that such opportunities offer,” Darius Pandole, managing director and CEO, Private Equity and Equity AIFs at JM Financial, told DealStreetAsia in a chat.
Going forward, the trend is expected to continue. However, it’s not buyout deals alone. Even distressed assets across diverse sectors in the country are increasingly evincing investor interest.
“Given the extraordinary situation arising from the COVID-19 pandemic and the downturn in the Indian economy, the quantum of distressed deals has increased significantly… with various reforms initiated by the government, including the Insolvency and Bankruptcy Code, there are various opportunities for distressed investment funds and ARCs,” added Pandole.
Over the past few years, PE investments in India have consistently aggregated over $25 billion per annum. The industry has experienced significant growth in terms of the capital invested, the number of funds operating, and the number of deals done annually.
However, with the burgeoning startup ecosystem coming to the forefront, sometimes there seems to be a thin line between venture capital (VC) investments and some early-growth investments by PE players. How do fund managers address such overlapping strategies?
“It’s unlikely that PE investors will take startup risks, but some players are willing to enter early in well-funded and early-stage companies. Such investments helps them diversify and improve returns,” said Pandole.
Late last year, JM Financial PE closed its second India-focused fund that received commitments worth over Rs 600 crore. So far, it has completed five investments across diverse sectors such as financial, consumer retail and co-living, among others.
Edited excerpts of the interview
