In India, 2020 ended with private equity (PE) and venture capital (VC) investments at USD 47.6 billion, compared to USD 47.3 billion in 2019. Although deal volume and value fell from the previous year, it was a remarkable H2 2020 recovery given that some had projected a -40 to -50 percent decline in value. During the year, general partner (GP)-limited partner (LP) engagement increased significantly. With the absence of in-person interaction due to government-ordered lockdowns and travel bans, investors sought to bridge that gap with more data transparency.
Having experienced the worst of the pandemic, but seemingly not yet out of the woods, what are investors’ expectations in the Indian private market and how will managers meet them?
To feed the growing appetite for increased data transparency and to ensure sustained and consistent communication with LPs, GPs have been forced to leverage technology for virtual meetings and to secure document exchange.
Managers who adapted quickly to leverage technology gained a significant competitive advantage in demonstrating to investors that their portfolios are in good hands. Toward the end of 2020 when investment activity began to pick up again, managers swiftly replaced on-site visits with portable cameras, drones and other technologies to conduct due diligence, assuring investors that business was able to resume. While in-person interactions will likely never be fully replaced, this rapid adoption of technology has helped many firms in the private market conduct due diligence, fundraise virtually and share portfolio developments remotely.
Vaccination drives have begun to clear the clouds of uncertainty as India takes steps toward the full reopening of the economy. Consequently, we expect fundraising activity to pick up through a mix of in-person and virtual activity that is likely to drive due diligence and fundraising processes.
The Way Forward
International capital that focuses on emerging markets is looking toward interesting themes out of India as the region has seen some large unicorn exits. VCs in specialized sectors are also gaining traction. In 2021, LPs are more interested in sustainable and repeatable investment strategies that can weather this storm of volatility, while maintaining a seamless flow of interaction with GPs.
How are LPs relooking at due diligence on GPs and past portfolios? How are GPs conducting more stringent diligence on potential investees?
What is the future of alternatives for domestic institutional investors?
Join me at the VCCircle Limited Partner Summit 2021 from February 18-19, 2021 to discuss this evolving nature of the LP-GP relationship and how the overall alternative investor class is tackling current challenges.
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