India equity deals set to pick up pace as investors hunt post-pandemic opportunities
Analysts and bankers say that after bringing in record U$ 30 Billion through public and private equity acquisitions this fiscal year, cash-rich investors will be looking for Indian businesses.
Due to India's large middle class and easy access to affordable smartphones and the internet, global investors have rushed to India’s online platforms to support unicorns.
Analysts also believe that China's regulatory crackdown on its technology businesses has prompted some foreign investors to choose to invest in the second-largest country in the world.
Indian companies are raising funds from e-commerce platforms to food delivery apps operators. This is at a time when India's economic recovery has slowed down in recent months due to the threat of coronavirus strains.
According to Pitchbook statistics this year, US$ 22 Billion has been raised through private equity capital deals, including pre IPO fundraising rounds. This puts India on track to surpass the 2020 record of US$37 billion.
Independent Refinitiv statistics show that foreigners spent US$ 13.21 billion on the first half this year. This is a record amount, up from US$ 4.99 trillion in the same period last.
Additionally, US$5.4 billion was raised by 43 initial public offerings (IPOs). This is a significant increase from US$ 1.24 trillion last year.
Refinitiv statistics show that IPO growth in India was nearly twice the rate of Asia's, including Japan, growth in the first half. In Asia, US$ 71.6billion was raised, up from US$ 31.08billion a year ago.
Paytm, an Indian digital payments startup, counts China's Fintech giant Ant Group as one of its investors. SoftBank in Japan is also among its investors.
According to Mr. Gaurav Mari, JPMorgan's Asia Pacific head for private capital markets, COVID has helped accelerate the current trend towards digital consumption in either food delivery or retail.
"This consumer behavior trend is unlikely to reverse. This is why tech-driven companies are gaining traction... Investors focus on whether these businesses are fundamentally sound over the long term."
It is expected that the rapid market debut of Zomato Ltd., an Indian food delivery company, will boost the near-term IPO pipeline. After the initial public offering, which raised US$1.3 billion, the stock shot up by 66%.
Swiggy, a competitor to Swiggy, received US$ 1.3 Billion last month from Soft Bank Vision Fund II, and Prosus, a technology investor. The business raised US$ 800 millions in April.
Flipkart, owned by Walmart Inc., raised US$ 3.6billion in its latest fundraising round. This is more than triple the Indian online retailer’s valuation of US$ 37.6billion in three years. Its market debut was scheduled for March.
"This is an emerging economy, where the local market will grow faster than any other place in the world," stated Mr. Devarajan Nambakam (managing director at Goldman Sachs India).
According to Maria, JPMorgan, foreign investor interest is growing as more deals are made in the country.
"There were very few occasions when a billion-dollar fund raising would happen... As capital markets mature, we are seeing a higher interest by investors in private companies in India," Maria said.
After Beijing's wide-ranging regulatory attack on its behemoths in antitrust violations, Bank of America equity analysts last week stated that Australian and Indian IT companies were the best placed to reap the benefits of a weaker China tech sector.
"The Indian market has a lot more potential for international investors," stated Ms. Kiran Nandra, Pictet Asset Management London, who made an investment in the Zomato IPO.
"The ecosystem is more diverse because there are many non-Indian corporations holding tranches of Indian companies. It encourages competition.