India Private Equity Report 2020

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 India Private Equity Report 2020

Contents

Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. Investments: A record high. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2. Covid-19 impact and key takeaways. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3. Fundraising: No lack of capital for good deals . . . . . . . . . . . . . . . . . . . . . . . . 29

4. Exits: Some slowdown. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

5. Sectors in focus: SaaS and fintech. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

India Private Equity Report 2020
 India Private Equity Report 2020

Executive Summary

Looking back at 2019

Private equity in India thrived and enjoyed a record year in 2019. Private equity (PE) and venture
capital (VC) investments rose to their highest level in the last decade at $45.1 billion, primarily due to
the increasing number of large deals greater than $100 million as well as an increase in their average
deal size. Record VC investments also contributed to the surge. In absolute terms, the usual sectors
banking, financial services and insurance (BFSI) and consumer technology continued to be the top
two sectors, while investments in real estate and infrastructure, telecom and IT and ITES also grew.
Following the trend from previous years, the total share of buyouts increased, with a rise in growth
and late-stage investments.

Asia-Pacific (APAC)-focused fundraising continued to decline due to the Chinese government’s

tightened restrictions on PE investments. That said, India-focused dry powder remained healthy with
no lack of capital for good deals.

India also witnessed a decline in exit value in 2019, relative to the previous two years, resulting from
a decreasing number of exits throughout the year. Investors highlighted IPO market unpredictability
and macroeconomic softness to be the principal reasons for weak exit opportunities. Despite the
decline, returns (multiple on invested capital) remained strong.

We believe there will be a short-term dip in investment activity with Covid-19, as already evidenced
globally. However, price correction across the board will present an investment opportunity. Investors
should pay close attention to their portfolios and take actions to adapt to changes in the economy.

A strong exit track record will be important for future investments. Having seen record investments
this year, Software as a Service (SaaS) and cross-sector technologies will be the most attractive
opportunities for investors in the future. A majority of investors believe that top-line growth and
capital/cost efficiency will be the largest value creators in the future and see high-seller pricing
expectations, macroeconomic softness and the Covid-19 pandemic as key concerns amid current
market conditions.

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 India Private Equity Report 2020

Investments: A record high

India continued to be the second largest private equity deal market in APAC with the most growth in
the region. The country drew record investments, the highest in the last decade, to the tune of $45
billion from 1,053 deals during the year. Investment value was about 70% higher than 2018 and
nearly 110% higher than the previous five-year average. However, the China PE market retracted with
a decline in both deal value and volume due to trade war concerns, social unrest and stringent
Renminbi fundraising regulations.

From a sector perspective, real estate and infrastructure, telecom, IT and ITES, and BFSI contributed
to more than 90% of the growth in investment value. Growth in real estate and infrastructure was
driven by a few large infrastructure deals, as well as the use of real estate investment trusts (REITs) as
an investment vehicle, whereas telecom was driven by two large deals—Reliance Jio Infratel and
Bharti Airtel.

BFSI and consumer technology displayed strong performance, remaining the largest sectors by
investment value, and contributing about 35% of the total deal value. BFSI continued strong growth
with investments of $8.4 billion. As in previous years, BFSI investments were fueled by deals in
banks as well as nonbanking financial companies (NBFCs) that continue to flourish in the
ecosystem, including Aadhar Housing Finance, Bajaj Finance and DMI Finance. NBFCs have thrived
in segments that are either inaccessible or unattractive for traditional banks. For example, micro,
small and medium enterprise (MSME) lending continues to be a huge opportunity to meet the large
unaddressed debt demand.

The other sector to remain dominant was consumer technology, which attracted $7.7 billion of
investments in 2019. Almost half of the investments were in vertical e-tailers/marketplaces and
fintech companies. After the rise of broad-based/horizontal e-commerce in the early part of the
decade, recent years have seen a shift toward vertical-focused e-commerce players, especially in niche
and high engagement and frequency categories such as beauty and grocery. This year specifically saw
investment activity in companies such as Lenskart, Zilingo, Grofers and FirstCry.

Regarding fintech, there was a flurry of investments in consumer payments and lending, including
Paytm, CRED, Tala and Razorpay. Consumer lending increased due to the growth of online
purchases in Tier 2+ markets, and consumer payments rose on the back of instantaneous and direct-
to-bank transfers, and innovation with new models like CRED.

The top 15 deals constituted about 35% of total investment value in 2019. This is slightly lower than
last year, when the top 15 deals made up almost 40% of the total value. Of the top 15 deals, five were
in real estate; three in IT and ITES; and the rest across BFSI, telecommunications, energy and
consumer technology. Notable large investments in 2019 included stakes in Reliance Jio Infratel,
Pipeline Infrastructure, Axis Bank, GMR Airports, GVK Airport Holdings and Paytm.

4
 India Private Equity Report 2020

Similar to previous years, the total share of buyouts rose, with an increase in growth and late-stage
investments. These featured a few large individual buyouts like Reliance Jio Infratel ($3.5 billion) and
Pipeline Infrastructure ($1.8 billion).

With recent investments from global players, competitive intensity in the Indian investment market
has progressively increased, with 662 active funds in 2017-19 compared with 553 funds in 2015-17.
A majority of surveyed investors viewed large global PE funds and local and regional PE firms as the
strongest competitive threat in the future.

Funds expect to continue investing in IT and ITES and consumer technology with a special focus on
certain subsectors like SaaS, cross-sector technologies and other B2C online services. At the same
time, investors see short-term dealmaking impacted by the Covid-19 pandemic and a potential
financial crisis as the biggest macro risk to their portfolio.

Covid-19 impact and key takeaways

The macroeconomic backdrop is evolving real-time with Covid-19 expected to have a more significant
impact than other major epidemics due to its high spread rate and increased global
interconnectedness. Countries are pulling varying levers to contain the virus, creating economic
uncertainty, and China’s trajectory suggests that countries will face a near-term shock from
contraction in economic activity. India is also beginning to face the impact of Covid-19, with major
import and export destinations affected and the stock market taking a hit in recent months.

In this context, investors should pay close attention to their portfolios and take actions to adapt to a
continually changing economy. Considerations include meeting evolving customer demand,
determining cost-saving methods, planning contingencies, and strategizing for long-term growth.

China is starting to see early signs of economic recovery since March 1, when the country moved to a
controlled recovery phase. From a consumer perspective, the prolonged lockdown (late January to the
end of February) has resulted in long-lasting consumer behavioral changes in China, including
increased time spent on activities like digital productivity and digital leisure. Consequently, in India
too, a few sectors could benefit from the behavioral changes and increase in user bases. These could
include sectors such as digital entertainment (video streaming, gaming), fresh e-commerce,
telemedicine, remote work and remote study.

While we will likely see a reduction in investments in H1 2020, it will be accompanied by a price
correction across the board. Based on global financial crisis (GFC) experience, deals invested during
or after a downturn tend to do well. The market disruption caused by Covid-19 will likely lead to
growth in select pockets and create investment opportunities.

5
 India Private Equity Report 2020

Fundraising: No lack of capital for good deals

APAC-focused fundraising slowed considerably, dropping from nearly $200 billion in 2017 to about
$80 billion in 2019, which represented a significant decrease from around 25% of global fundraising
in 2017 to about 13% in 2019. This was largely driven by weakening Renminbi-based funds,
reflecting the Chinese government’s tightened restrictions on PE investments.

In the Indian context, dry powder decreased to 2016 levels, at $8.3 billion in 2019. While this is lower
than the levels witnessed in the previous two years, there is sufficient capital for high-quality deals.

Investors expect the fundraising environment to be more challenging in the next 12 months, driven
by record-setting previous years, cautiousness of a slow economy and limited partnerships being
highly selective with increasing competition. However, fundraising is not a major concern for
investors as compared to last year, with high-seller pricing, macroeconomic softness, increased
competition and challenging exit conditions as greater concerns.

Exits: Some slowdown

Exits decreased finishing at nearly $13 billion, slightly lower than the last two years (ex-Flipkart 2018
exit). This fall was primarily driven by a reduction in exits from 265 to 200.

Investors attributed the drop in exit volume to IPO market unpredictability and macroeconomic
softness through 2019. With an unpredictable public market, strategic sales became the preferred
mode of exit, accounting for about 50% of exit volume.

Among the various sectors, IT and ITES and consumer technology together represented nearly 40%
of exit volume. A few large exits dominated in 2019, with the top 10 exits accounting for nearly 50%
of total exit value, albeit lesser than 70% in 2018. Major exits included Oyo (Sequoia, Lightspeed),
GMR Airports Holding (multiple funds), CitiusTech (General Atlantic), Ruchi Soya Industries
(multiple funds) and Genpact (GIC, Bain Capital).

In the last five years, returns (multiple on invested capital) have seen an upward trajectory, increasing
from an average of about 3x in 2014-15 to nearly 4x in 2018-19. Consumer technology, IT and ITES
and BFSI have seen above-average returns and the highest multiples. Investors cited strong
management, superior market growth and keen buyers as the main sources of success at their recent
exits. However, management issues such as capability, bandwidth and alignment, and unfavorable
disruptions post-close in the industry, as well as competitive dynamics were given as reasons for
unsuccessful exits.

Over the next five years, investors believe that top-line growth and capital and cost efficiency
will be the largest value creators for the deals they exit. Given the significant overhang of PE
investments accumulated over the last decade, a sound exit track record will be important for
future growth in investments.

6
 India Private Equity Report 2020

Sectors in focus: SaaS and fintech

India’s vibrant consumer technology and IT and ITES sectors have expanded rapidly, fueled by abundant
access to private equity and venture capital, ample dry powder, growing internet penetration, falling
prices of data, underpenetrated markets, high-quality domestic talent and innovative start-ups. The
majority of surveyed investors cited SaaS and cross-sector technologies as the most attractive
opportunities in the next three to five years.

As companies race to harness big data, advanced analytics and machine learning, they are turning to
software on demand, based in the cloud. In this context, the underlying Indian SaaS market is expected
to grow around 50% annually from nearly $6 billion in 2019 to over $20 billion in 2022.

A growing number of Indian SaaS companies are targeting both enterprises and small and medium-size
businesses (SMB) across domestic and global markets. In the global markets, these companies are able
to offer high-quality products with cost arbitrage due to local talent and thus satisfy the demand for a
high degree of verticalisation. They are also benefitting from an increased digital penetration across
verticals and a growing adoption of SMBs in the local market.

Annual investments in SaaS companies grew across all three distinct archetypes—horizontal business
software, vertical-specific business software and horizontal infrastructure software. Horizontal business
software was the largest subsegment growing in deal volume, with the top 10 deals accounting for about
65% of the total deal value in 2019. Notable large investments included funds raised by Freshworks,
Druva, Icertis, Near (Allspark) and OkCredit.

In evaluating a SaaS company for investment, key determinants include a large addressable
market, an established proof of concept, strong customer stickiness, a diversified customer base,
a high degree of product standardization, marquee customers in quality conscious global markets
and cost-competitiveness.

Companies that deploy new technologies in existing industries can create fast-growing start-ups based
on new business models. For example, health technology leaders are building wearable devices that
monitor patients remotely. Fintechs have developed mobile payment systems and stock-trading apps that
disrupt traditional financial services. These cross-sector technologies are being monitored closely by
investors in planning their future investments.

Fintech continues to be the largest cross-sector technology segment in India, both in terms of deal value
and volume, substantially growing from $0.7 billion investments (49 deals) in 2018 to $2.4 billion
investments (83 deals) in 2019. This impressive growth was driven by investments in payments and
lending companies, together accounting for nearly 80% of total investment in fintech in 2019. Payments
and lending comprised eight of the top 10 deals including Paytm, CRED, Tala, Razorpay and Zeta.

The MSME debt demand is expected to almost double in the next five years and presents a massive
opportunity due to the large, unaddressed demand. Multiple archetypes of lenders including banks,
NBFCs, fintech firms and e-commerce players are trying to tap into this new opportunity which is likely
to gain investor traction in the future.

7
1.
• India continued to be the second largest deal
market in the Asia-Pacific region, and grew
more than other countries in 2019. India’s
share of the APAC deal market increased to
nearly 25% in 2019, while China’s PE market
retracted over the last year.
Investments:
• The total investment value rose to $45.1
A record high billion, the highest in the last decade, with
the largest amount of VC investments and an
increase in the number and average deal value
of $100 million+ deals.

• BFSI investments were concentrated in

nonbanking financial companies and banks,
and consumer tech investments were in fintechs
and vertical e-tailers and marketplaces.

• The top 15 deals constituted more than 35%

of the total deal value. As in previous years,
the total share of buyouts and late-stage
investments increased, featuring a few large
individual buyouts.

• The number of active participating funds

continued to grow, and investors expect local
and global private equity firms to represent the
biggest competitive threat in 2020.
 India Private Equity Report 2020

Figure 1.1: India continued to be the second-largest deal market in APAC with the highest growth
in the region
APAC deal value: 5-year average ($B)

57 137 150
100%
Japan
80
Southeast Asia
60 Australia and
New Zealand
40
Korea
20 India

0 Greater China
2009–13 2014–18 2019

Average deal 84 121 122

size ($M)

Share of India 14% 14% 24%

Share of India 34% 25% 56%

(vs. China)

Note: Excludes real estate and infrastructure

Source: Bain PE deals database

Figure 1.2: The private equity market in China retracted in 2019, as both deal value and count
declined because of fewer $1 billion or greater deals
GC PE deal value ($B) GC PE deal count 2019 vs. 2019
14–18 vs. 2018
Driven by trade war concerns, social average
$125B unrest and stringent RMB fundraising regulations 800

102
100
600
Deal count
78 78
75 −19% –20%
65 63
400 Deal value
51
50 –29% –50%
34
25 24 200
25 –2% –31%
15 17

–17% –19%
0 0
2009 10 11 12 13 14 15 16 17 18 19

Percentage value 31% 30% 28% 18% 18% 37% 41% 35% 46% 44% 35%
of $1 billion
or greater deals

<US$100M US$100–US$1B >US$1B Deal count

Note: Excludes real estate and infrastructure

Sources: AVCJ; Bain analysis

10
 India Private Equity Report 2020

Figure 1.3: Additionally, China experienced a dip in investment activity in early 2020 as a result
of the Covid-19 crisis
GC PE/VC deal value ($B) Deal count

$15B 100
14

80
10
9 60
8
7
40
5
3
20

0 0
2016 2017 2018 2019 2020
Jan. & Feb Jan. & Feb Jan. & Feb Jan. & Feb Jan. & Feb

Chinese Feb 7 Jan 27 Feb 15 Feb 4 Jan 24

New Year
start date Jan 23, Wuhan announced city quarantine status

Deal value Deal count

Note: Excludes real estate and infrastructure

Source: AVCJ; Bain analysis

Figure 1.4: Investment momentum in India accelerated in 2019, with total investment value being
the highest in the last decade
Annual investments in India (including real estate and infrastructure, $B)

50
45.1
Significant deal activity in real estate and
40 infrastructure occurred in Q4. Telecom and
BFSI also contributed to growth Q4

30
26.8 26.3
22.9 Q3

20
16.8
14.8 15.1 Q2
11.8
9.5 10.2
10
Q1

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Number 380 531 551 696 800 1,049 976 700 793 1,053
of deals

Notes: Includes real estate and infrastructure, private investment in public equity (PIPE) and venture capital (VC) deals; deal volume includes deals where deal value is unknown
Source: Bain PE deals database

11
 India Private Equity Report 2020

Figure 1.5: Almost 90% of growth from 2018 to 2019 was driven by an increase in the number
of large deals as well as their average value
Investment evolution across deal sizes (2018 to 2019, $B)

Small deals (<$100M) Large deals (>=$100M)

50
12.0 45.1

40

4.6
30 2.4
26.3
–0.2
20

10

0
2018 Average deal value Deal volume Average deal value Deal volume 2019

Notes: Includes real estate and infrastructure deals; deal volume and average deal value are only for deals with a known value
Source: Bain PE deals database

Figure 1.6: Real estate and infrastructure, telecom, IT and ITES, BFSI and energy contributed to the
majority of growth
Investments by sector ($B) Driven by a few large infrastructure deals, introduction of REITs
as investment avenue and growth in commercial real estate

50
5.3 45.1
4.3
40
4.1
3.2
30 2.1
26.3 0.6 0.7
0.1 0.1 0.5 Two large deals:
–1.5 –0.4 –0.3 Reliance Jio Infratel
20 and Bharti Airtel

10

0
2018 Manufacturing Media and Other Shipping and BFSI Telecom 2019
entertainment logistics

Consumer/ Healthcare Engineering and Consumer Energy IT and ITES Real estate and
retail construction technology infrastructure

Note: Others includes a variety of industries such as education, sports, hospitality and talent management
Source: Bain PE deals database

12
 India Private Equity Report 2020

Figure 1.7: High-growth sectors of 2019 witnessed an increase in both deal volume and average
deal value
Volume of large deals Average deal size for large deals
across sectors across sectors ($M)

125 400
16%
68% 104 333
100 288
300
75
62
200
50
100
25

0 0
2018 2019 2018 2019
Sector 2018 2019 CAGR Sector 2018 ($M) 2019 ($M) CAGR
Real estate and 6 12 100% Real estate and 182 424 133%
infrastructure infrastructure
Telecom – 2 – Telecom – 2,133 –
IT & ITES 5 11 120% IT & ITES 161 329 104%
BFSI 12 20 67% BFSI 345 349 1%
Energy 6 9 50% Energy 354 469 33%

Notes: We define large deals as deal of $100 million or more; deal volume as well as average deal value are only for deals with a known value
Source: Bain PE deals database

Figure 1.8: In absolute terms, BFSI and consumer tech continue to be the largest sectors in 2019,
while IT and ITES experienced significant growth in the last year
Annual investments ($B) CAGR CAGR
(2012–19) (2018–19)
Overall
10 12 15 23 17 27 26 45 24% 75%
100%
Other industries By sector
Consumer/retail 16% –37%
80 Telecom – NA

Energy 39% 94%

60
IT and ITES 22% 230%

Real estate
20% 401%
40 and infrastructure

Consumer
33% 9%
technology
20

BFSI 38% 61%

0
2012 2013 2014 2015 2016 2017 2018 2019

Source: Bain PE deals database

13
 India Private Equity Report 2020

Figure 1.9: BFSI investments consist largely of deals in nonbanking financial companies and
banks, with nearly 65% of deal value
Annual investments in BFSI ($B) Segment Company Fund(s) Value ($M)

Top five deals Axis Bank BlackRock, GIC Special Investments, T. Rowe Price 1,760
in banking

8.4 OakNorth Bank The Clermont Group, SoftBank 440

100%
Asset management
Ujjivan Bank CX Partners, GIC Special Investments, Other 42
Stocks/investment
80 Suryoday Small DEG, Kotak Mahindra Life Insurance, Gaja Capital, 36
Insurance Finance Bank HDFC Life Insurance, Other

Jana Small TPG, Amansa Capital, HarbourVest Partners 32

Finance Bank
60
Banking Top five deals in Aadhar Housing The Blackstone Group 420
non-banking financial Finance
companies (NBFCs)

40 Bajaj Finance GIC Special Investments 339

DMI Finance DMI NIS (Liechtenstein) 230

20 NBFC
Cholamandalam CTBC Bank, First Abu Dhabi Bank, IFC, 222
Investment & Finance Mitsubishi UFJ Financial Group

Mahindra & Mahindra International Finance Corporation 200

0 Financial Services
BFSI

Note: Bajaj Finance received additional investments through mutual funds

Source: Bain PE deals database

Figure 1.10: Consumer tech investments consist largely of deals in fintech and vertical e-tailers
and marketplaces, with about 50% of deal value
Annual investments in consumer Segment Company Subsegment Funds Value ($M)
tech ($B) Top five deals in Lenskart Eyewear SoftBank 275
vertical e-tailers/
marketplaces
7.7 Zilingo Apparel Sequoia Capital, Temasek, Burda 226
100% Principal Investments, Sofina
Other
Pharmeasy Healthcare Temasek, CDPQ, LGT, KB Financial 220
Horizontal e-commerce Partners, Bessemer Venture Partners,
Food tech Orios Venture Partners, Eight Roads
80 Media and entertainment Grofers Grocery Sequoia Capital, SoftBank, Tiger Global 200
Ed tech Management, KTB Network

Real estate tech FirstCry Baby care SoftBank 150

60 Travel and
transportation Top five deals Paytm Payments Ant Financial Services Group, SoftBank, 1,000
in Fintech D1 Capital Partners, Discovery Capital,
T. Rowe Price
40 Verticalized e-tailers PolicyBazaar Insurtech Tencent Holdings 150
marketplaces

CRED Payments RTP Global, Sequoia Capital, Ribbit Capital, 120

Tiger Global Management, Hillhouse Capital,
20 Greenoaks Capital Partners, Other
Fintech Tala Lending Lowercase Capital, DCVC Data Collective, 110
IVP, PayPal Ventures, Other

0 Razorpay Payments Tiger Global Management, Ribbit Capital, 75

Consumer technology Sequoia Capital, Y Combinator

Source: Bain PE deals database

14
 India Private Equity Report 2020

Figure 1.11: The top 15 deals constituted about 35% of total deal value, below the previous
year’s 40%
Investments by deal size ($B) Company Sector Fund(s) Value ($M)

Reliance Jio Infratel Telecom Brookfield Asset Management 3,550

Pipeline Infrastructure Energy Brookfield Asset Management 1,824

26.3 45.1 Axis Bank BFSI BlackRock, GIC Special Investments, T. Rowe Price 1,760
100%
GMR Airports RE & Infra Tata Sons, GIC Special Investments, SSG Capital Advisors 1,158

GVK Airport Holdings RE & Infra ADIA, National Investment and Infrastructure Fund, 1,076
80 PSP Investments

Paytm Consumer Ant Financial Services Group, SoftBank, D1 Capital 1,000

Other Technology Partners, Discovery Capital, T. Rowe Price

60 CitiusTech IT & ITES Barings 880

Bharti Airtel Telecom GIC Special Investments 715

NIIT Technologies IT & ITES Barings 708

40 NHAI TOT Bundle 3 RE & Infra I Squared Capital, International Finance Corporation 700

SBI Life Insurance BFSI The Carlyle Group, CPP Investments 652

20 Top 15 Indian Hotels RE & Infra GIC Special Investments 600

deals Company SPV

Udaan IT & ITES GGV Capital, Altimeter Capital, Hillhouse Capital, 585
DST Global, Lightspeed Venture Partners, Footpath
0 Ventures, Citi Venture Capital, Tencent Holdings
2018 2019 The Leela Palaces, RE & Infra Brookfield Asset Management 563
Hotels and Resorts
Top 15 ~40 ~35
deals (%) Greenko Group Energy GIC Special Investments, ADIA 495

Note: Does not include deals where deal value is unknown

Source: Bain PE deals database

Figure 1.12: Share of buyouts, and growth and late-stage investments continued to increase

Deal volume by purchase stake Deal volume by investment stage

100% 100%
Late stage
Buyout

80 80 Growth stage

60 60

40 Minority 40
Early stage

20 20

0 0
2014–15 2016–17 2018–19 2014–15 2016–17 2018–19

Notes: Includes only deals where stake/deal size is known; buyout refers to >50% stake; does not include real estate, infrastructure or energy deals; deals worth <$20M have been
classified as early, $20-85M as growth and >$85M as late stage
Source: Bain PE deals database

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 India Private Equity Report 2020

Figure 1.13: Competitive intensity in the market increased, as number of participating funds grew

Number of active players in India Number of active players in India by type

533 662 Other

800 100%
Corporate
662
80
600 LP institutional investors
533
LP government affiliates
60

400 GP domestic

40
GP regional

200
20
GP global

0 0
2015–17 2017–19 2015–17 2017–19

Notes: An active player has made an investment in the designated time period; GP global indicates any venture capital or private equity player that is active globally; GP regional
indicates any private equity investor that focuses on deals between countries in Asia-Pacific; GP domestic focuses on one country with very limited external presence;
LP government affiliate is controlled by a government; LP institutional includes investment banks, asset management, financial institutions, insurance, corporate pension funds and
corporations; other includes private investors and family offices; excludes real estate and infrastructure
Source: AVCJ

Figure 1.14: Investors also concur that competitive intensity has moderately increased

How has the overall competition level changed in the market? What do you see as the biggest competitive threat in 2020?
Share of respondents selecting each option Share of respondents selecting each option

80% 80%

67
61
60 60
50

40 40 39
33

22
20 20 17
11
6 6
0
0 0
Increased Increased Stayed broadly Decreased Large LPs/SWFs Venture Crossborder
significantly moderately the same global PE investing capital investment
firms directly firms from overseas
PE firm

Local/regional Other players Strategic/corporate

PE firm (hedge fund) players

Source: Bain Private Equity Survey 2019 (n=28)

16
 India Private Equity Report 2020

Figure 1.15: Investors are cautious about the financial crisis, and India’s stock market took a hit as
a result of the Covid-19 slowdown and sharp oil price cut
Rank of greatest macro risks to PE portfolios

Share of respondents selecting each option Major stock index in India CAGR
as of 15 March 2020, indexed to 100 (Feb 19–Feb 20)
100% 120
92

80
110

60
100
40
33
25
90 Sensex 4%
20
13
8
4 4
0 80
Financial Rise of Trade war Social Climate Oil supply Bio Dec18 Feb19 Apr19 Jun19 Aug19 Oct19 Dec19 Feb20
crisis populism unrest change crunch diversity
Mar20 up
loss
Jan19 Mar19 May19 Jul19 Sep19 Nov19 Jan20 to 15th

Source: Bain Private Equity Survey 2019 (n=28)

17
2.
• India is beginning to face the impact of
Covid-19, with major import and export
destinations impacted as well as the stock
market which has taken a hit in recent months.

• In the near term, investors need to triage their

portfolio companies to understand the impact
Covid-19 impact
and determine suitable actions for portfolio
and key takeaways companies. Portfolio company CEOs need to
take immediate actions to ensure business
continuity and plan for value creation to retool
their businesses for the future.

• From an investment perspective, we will likely

see a reduction in investments in H1 2020
along with a price correction across the board.
Investors could act differently according to
types of industry consumption patterns to
minimize the Covid-19 impact.

• Based on global financial crisis (GFC)

experience, deals invested during or after
a downturn tend to do well. The market
disruption caused by Covid-19 will likely
lead to growth in select pockets (e-commerce,
enterprise technology/SaaS, healthcare,
on-demand services) and create
investment opportunities.
 India Private Equity Report 2020

Figure 2.1: Covid-19 is starting to affect India as well as its major import and export destinations

Imports: In 2019, China accounted for 20% of non-oil imports

by India Exports: In 2019, US accounted for 16% exports from India

20%
20% 20%

16%
15 15

10 10 9%
8%

5% 5% 5% 5%
5 5 4% 4%

0 0
China US Hong Switzerland UAE US UAE China Hong Singapore
Kong Kong

Government of India announced a nationwide lockdown, starting 25th March, restricting the movement of goods and people
in an attempt to prevent the spread of Covid-19

Source: Ministry of Commerce and Industry, India

Figure 2.2: The impact of Covid-19 is expected to be more severe than other major epidemics

Implications
Bird Flu, Spanish Flu, Swine Flu,
2014–17 SARS, 2003 Covid-19 1918 2009–10
~1,600 ~8,000 ~1.3M+ ~350M–750M ~750M–1.4B
The case count is low, but it
Cases has only been about four
months since the outbreak

Swine Flu Covid-19 SARS Spanish Flu Bird Flu

~0.01–0.08% ~0.5% ~4% ~6.6% ~10% ~40%
The fatality rate is undetermined,
given the number of unreported
Fatality rate
cases and the need for more
testing and information
SARS
Bird Flu Swine Flu Spanish Flu 3.0
0.03–0.4 1.3–1.7 1.5–1.8 ~2.0 Covid-19 ~3.5
The high spread rate (often
Infectivity (R0) asymptomatic) includes
community transmissions,
drives global spread
Severity Low High

The combination of a relatively low fatality rate, a fast rate of spread and a high proportion of cases with symptoms
similar to cold/flu make this uncommonly difficult to address with containment measures

Note: All Covid-19 epidemiology figures are as of April 6th; R0 refers to the average number of people infected by one sick person
Sources: National Health Commission of the PRC; Bain Macrotrends Group analysis

20
 India Private Equity Report 2020

Figure 2.3: Early signs of recovery from Covid-19’s impact are emerging in China

Significant near-term shock the from the sharp Early signs of a recovery starting to emerge
contraction in activity

Coal consumption has picked up since

Estimated China Q1 2020 GDP drop,
40% compared to Q4 2019
~40% YoY decline in January with
~25% YoY current decline

Five million Chinese citizens lost their

~5M jobs in January and February, adding 80–90% Rate of work resumption for businesses
~1% to unemployment

PMIs also fell significantly from January Manufacturing capacity utilization after
to February 70–80% lockdown lifted

Month on month point decrease in

–10.8% manufacturing PMI, down from 51.1 points 35M Daily automobile load returned to
pre-Covid levels on China’s highways

Month on month point decrease in services

–25.3% PMI, down from 51.8 points; transportation,
tourism and catering sectors most affected

Sources: China National Bureau of Statistics; TOMTOM traffic index; China Association of Metros; Bain Macrotrends Group analysis

Figure 2.4: India can learn from various interventions seen around the world

Lessons for government: Lessons for government:

Lessons for companies Socioeconomic interventions Medical interventions

1 Set up a war room to make rapid 1 Supply chain management 1 Dedicated health facilities and
decisions ahead of business need • Divert public and private widespread testing

2 Establish health and safety transportation assets as needed • Building or dedicating healthcare
measures to ease logistical concerns facilities exclusively for Covid
• Assist in sourcing by patients
3 Focus on existing customers to consolidating fresh produce • Large-scale testing efforts
reduce churn in a region and/or targeted testing of risk
groups
4 Reduce functional spending by 2 Fiscal relief: Defer business tax
going virtual payments by one quarter 2 Smartphone alerts: Applications
built to notify users of potential
5 Invest for the future by building 3 Stimulus packages: Offer
Covid risk and track health
new capabilities no-interest loans to retailers
outcomes
to support sellers
6 Open new channels of communi-
cation to customers, employees
and suppliers

7 Give back to the community via

subsidies and low-interest loans
or by hiring short-term staff from
affected industries

Source: Bain & Company

21
 India Private Equity Report 2020

Figure 2.5: Investors need to triage their portfolio companies to determine what actions to take

Couple portfolio company risk assessment with controllability to guide priorities Funds next steps

Controllable value at stake Factors for controllable value at stake • Develop custom action plans to
High Priority 2 Priority 1 address key risk for prioritized
Ability Can fund help mitigate the portfolio companies (financial, labor,
to impact risks? operational requirements for
Portfolio Co. 1 Portfolio Co. 2
successful implementation)
Share What share of fund does
of fund portfolio company make up? • Develop action plans for other high
Portfolio Co. 7 risk issues

Moderate • Create phased execution roadmap

Portfolio Co. 8 Factors for portfolio company risk to drive change while keeping focus
Portfolio Co. 6
Use Demand reduction exposure on high priority actions
Bain’s • Commence execution in line with
Portfolio Co. 5 risk Supply chain and ops roadmap
framework exposure
Portfolio Co. 3 Portfolio Co. 4 • Establish structure for continuous
Labor and talent risks follow up
Low
Low Moderate High • Identify best practices and share
Financial strength across portfolio
Portfolio company risk
• Mobilize resources to support
Priority 1: Large at risk portfolio companies with problem(s) that can be addressed priority portfolio companies
Priority 2: Portfolio companies that have lower risk with issues that can be addressed (OPEX/CAPEX injections)

Source: Bain & Company

Figure 2.6: Portfolio company CEOs need to Act Now and Plan Now

Mission
Act Now Plan Now
to protect and run the business today to retool the business for the future

Safety and security of Business

Recovery New normal
people and communities continuity

Management
Crisis management war room
approach
Mobilize the organization to protect the company’s
employees, customers and strategic flexibility

“New normal” transformation office

Prepare company and strategy to adjust
to accelerated structural changes
resulting from a pandemic-driven recession

Common tools
Lead: Manage disruption Orchestrate: Structured work streams
Do: Agile teams with daily results rhythm Track: Management tool

Source: Bain & Company

22
 India Private Equity Report 2020

Figure 2.7: Portfolio company CEOs can safeguard companies and prepare for the future across
six areas
Act Now Plan Now
Immediate actions to ensure business continuity Plan for value creation to retool for the future
Safety and security of our Business continuity Recovery New normal
people and communities
Example action plan: Example action plan:
largely similar across industries highly tailored between industries

Balance sheet Preserve cash and manage liquidity Optimize net working capital (NWC) for mid to long-
term; prepare for opportunistic transformative M&A
Cost structure Prepare for multiple scenarios requiring different levels Target and achieve sustainable cost structure
of cost reduction; take no-regrets actions
Customers Invest in customers and frontline employees; hone Address emerging needs and behaviors with new
value propositions; digitize marketing and selling value propositions and digital capabilities
Operations Stabilize operations including adjustments in sourcing, Restructure to create greater visibility, flexibility
production and supply chain and resiliency
People and Safeguard your people and contingency-plan your Adapt operating model to new ways of working
organization workforce while adopting remote ways of working
Strategy Triage in-flight initiatives; respond to government Refresh future-back vision and execution agenda;
actions; Use resources to help societies and strengthen crisis management capabilities; navigate
communities defeat Covid-19 new regulatory environment

Protect business from current risks Build a winning business for the future

Source: Bain & Company

Figure 2.8: From an investment perspective, investors could act differently according to types of
industry consumption patterns to minimize Covid-19 impact
Hit in short term, Hit in short term, Hit in short term, Spiked in short term, Spiked in short term, Spiked in short term,
headwinds long term recover in long term bounce back and decline in long term stabilize in long term keep growth momen-
stabilize long term tum in long term

Industries • Select traditional • Restaurant & food • Apparel and beauty • Personal • Offline grocery • Online
retailers products computers and (fresh food) entertainment
service
monitors
• Co-working spaces • Alcoholic drinks • Household goods • Distance learning
• Entertainment and
• Household • Packaged food • Digital healthcare
education (offline)
appliances
• Vertical
• Traditional retail
e-commerce
and commercial
real estate

Actions Avoid further investment Help portfolio Seek undervalued Avoid further Stay put for short term Identify companies with
as demand to remain companies survive and hidden gems with investment as demand overheat strong growth
on declining trend prepare for sustainable financing needs and likely to return to potential and invest
improvement invest for long term declining trend for long term value

Source: Bain & Company

23
 India Private Equity Report 2020

Figure 2.9: In this environment, potential target assessment should consider these five questions

Questions to answer Considerations What good looks like

How will industry Define industry’s demand profiles over time + Companies that are likely to bounce back
demand recover and potential recovery timelines, considering quickly post-crisis
post-Covid-19? government restrictions, consumption pattern
and consumer shift to substitutes + Companies with offerings unaffected by
substitutes
Is current distress Understand target’s historical financial and + Market leaders/successful companies prior
caused by company operating performance prior to Covid-19 to Covid-19
specific issues?
Assess whether target has resources to address + Companies with internal issues that can be
potential internal factors addressed with low investment

Is the company poised to Assess target’s ‘ability to win’ in new competitive + Companies that are likely to capture increased
succeed post Covid-19? landscape driven by its flexibility to modify demand due to resilient supply chain
operations, sales structure and customer
engagement + Companies that can respond timely to
changes in customer behaviors
Can we ensure short-term Assess target’s flexibility to scale operations + Companies with flexibility to temporarily
stability of the company? given short-term disruption risks and short-term scale operations up or down
liquidity needs to determine capital investment
required (including potential government aid) + Companies that are likely to receive
government support
Do we have a plan for Identify what value creation levers investors + Companies where investor playbook can
longer-term differential can pull to retool the target for the future add significant long-term value
value creation? (new value propositions for emerging needs,
M&A, cost management)

Source: Bain & Company

Figure 2.10: Deals invested during or after a downturn tend to do well based on global financial
crisis experience
Gross buyout deal MOIC by investment year

4X Pre-global financial crisis Post-global financial crisis

0
2005 2006 2007 2008 2009 2010 2011 2012

Pooled IRR 34% 17% 9% 8% 27% 19% 20% 25%

Invested capital ($B) 93 130 190 112 46 112 107 95
Number of deals 1,114 1,308 1,415 923 519 1,055 1,020 989

Pooled IRR Top quartile Median Bottom quartile

Notes: Deal-level data obtained from PE fund managers connected to CEPRES, all locations, all deal-sizes, grouped by investment year, pooled average weighted by deal invested
capital, buyout includes all buyout strategies, private debt includes all private debt strategies, turnaround includes investments into struggling businesses and special situation
includes investments into distressed assets where litigation, liquidation, or other unique but unusual situations are concerned
Source: CEPRES

24
 India Private Equity Report 2020

Figure 2.11: Based on China’s experience, consumers spend significant time using their mobiles
for at-home entertainment during the lockdown
Activities: Daily Work Digital Indoor Indoor Outdoor
necessity and study entertainment entertainment exercise activities

Activity-wise daily
time spent during
Covid-19 (%)

Stage 1: Emerging
situation

Stage 2: Rapid
escalation

Stage 3: Recovery
and controlled

Growth % (Stage 2 vs. Stage 1) 12% –36% 47% 48% 48% –74%

Growth % (Stage 3 vs. Stage 1) 2% 7% 10% –9% 22% –42%

Work resumes (mostly work-from- ~60% entertainment through Indoor exercise replaces
home) after Chinese New Year mobile phone across stages outdoor and gym (in stage 3)

Sources: China consumer survey post Covid-19 (n=981); Bain analysis

Figure 2.12: For mobile use, most app categories show significant growth in average time spent
per user
Activities: Short
Social video live Video Study/ Food Digital
media streaming Ecommerce streaming Gaming News work Music delivery OTA Browser health
Hours spent
per day during
Covid-19

Stage 1: Emerging
5.1
situation

Stage 2: Rapid
6.2
escalation
Stage 3: Recovery
5.1
and controlled

Short
Social video live Video Study/ Food Digital
media streaming Ecommerce streaming Gaming News work Music delivery OTA Browser health

Phase 2 growth
7% 48% –1% 57% 63% 57% 27% –8% –18% –27% 660% 373%
over Phase 1
Phase 3 growth
–2% 11% 1% 0% 4% –7% 9% 9% 0% 0% –26% 99%
over Phase 1

Sources: China consumer survey post Covid-19 (n=981); Bain analysis

25
 India Private Equity Report 2020

Figure 2.13: Consumer behavior changes continue beyond lockdown (during “control and
recovery” phase)
Change in consumer time spent in different mobile app categories across various stages of Covid-19
(indexed to emerging situation)

Increase in use driven by increasing Rigid demand driven by reshaping new use cases, as consumers
leisure time move online due to offline mobility control
Entertainment Shopping Digital health Study/work
2.5
2.50

2.00 1.9
1.8
1.7 1.7
1.50 1.4
1.3 1.3 1.3
1.2 1.2
1.1
1.0 1.0 1.0** 1.0 1.0 1.0 1.0 1.0
1.00 0.9*

0.50

0.00
Video Gaming Short video/ Fresh Digital health Study/work Study/work
streaming live streaming e-commerce (telemedicine) (tutoring/ (remote
knowledge) communication)
Emerging situation/normal Rapid escalation Controlled and recovery

* Consumer spend time on video streaming highly depends on availability of new content
** Survey audience includes people > 18 years old, miss younger consumer who may stay longer for gaming apps
Sources: China consumer survey post Covid-19 (n=981); Bain analysis

Figure 2.14: As a result, the market disruption caused by Covid-19 will likely lead to growth in
select pockets and create investment opportunities
Certain industries and companies will likely
see more demand Examples of companies outperforming S&P 500 since outbreak

Organized Increase in demand of grocery Stock development (2020, base in 100 on Jan 6th)
retail and staples from organized retail
and modern trade 200 Larger Covid-19
breakout outside
Greater China
180
E-commerce Increased use during restricted
movement due to ease of access
and availability of products 160
ZOOM

Enterprise As offices and schools close 140

tech/SaaS down, rising need for enabling
services to work from home 120 MODERNA

Healthcare Accelerated innovation and surge 100

of demand for healthcare NETFLIX
(Covid-19 vaccine development) LEIDOS
80
S&P 500
Services Social distancing increases
from home demand for services from home 0
such as entertainment and food January February March

Sources: Refinitiv; Bain analysis

26
India Private Equity Report 2020

27
3.
• Throughout the Asia-Pacific region, PE
fundraising slowed in 2019, largely reflecting
the Chinese government’s tightened restrictions
on PE investments. APAC’s share in global
fundraising dropped from more than 26% in
2016 and 2017 to 13% in 2019.
Fundraising:
• India-focused dry powder remained healthy
No lack of capital at $8.3 billion, albeit below the previous two
years, which were upwards of $11 billion.
for good deals
• A majority of investors believe the fundraising
environment in the next 12 months will be
more challenging than in 2019, primarily due
to a decline in fundraising, a slowing economy
and highly selective limited partnerships (LPs)
as a result of increasing competition.

• However, fundraising is not a key concern

amid current market conditions, featuring well
behind high-seller pricing expectations,
macroeconomic softness, increased competition
and challenging exit conditions.
 India Private Equity Report 2020

Figure 3.1: APAC fundraising plunged as Renminbi-based funds continued to soften

Asia-Pacific-focused capital raised by final year of close ($B)

199
200
182

150
137
123

100 95 Other country-specific

81
India

Pan-Asia-Pacific
50
Greater China –
other currency

0 Greater China – RMB

2014 2015 2016 2017 2018 2019

Share of global 18% 23% 26% 26% 16% 13%

fundraising

Notes: Includes regional and country funds; excludes real estate and infrastructure
Source: Preqin

Figure 3.2: However, India-focused dry powder is more than adequate and will ensure sufficient
capital for high-quality deals
Dry powder from India-focused funds ($B)

12.5
11.7
11.1
10.1
10.0 9.5
8.7 8.6
8.4 8.3
8.1
7.5 7.1

5.0

2.5

0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Notes: Value excludes real estate and infrastructure; figures as of December of each year
Source: Preqin

30
 India Private Equity Report 2020

Figure 3.3: Fundraising in 2020 is expected to become more challenging than in 2019

How was the fundraising environment in 2019 and how do you expect it to change in the next 12 months?

Share of respondents selecting each option

100%
Easier

Falling rate of fundraising following

80 As is a number of record-setting years

60
Investors cautious about slowing
economy
40
Somewhat more
challenging

20 LPs highly selective about GPs they work

with given competitive environment

0
2019 Next 12 months

Note: No respondent selected the option “Very challenging”

Source: Bain Private Equity Survey 2019 (n=28)

Figure 3.4: Investors are less concerned about fundraising as compared to last year

What are the key concerns you have amid current market situations?

Share of respondents selecting each option as top 3 concerns (2019)

80%
64 64
60

40 36 36

20 18 18 14 14 11 11 11
4
0
Macroeconomic Challenging exit Difficulty recruiting/ Increased competition Difficulty recruiting Trade war
softness (local conditions slowing retaining talent from govt and retaining between China
or global) exit plans in portfolio investors, hedge talent at PE/ and the US
companies funds and others investor level
High-seller pricing Increased competition Lack of debt availa- Lack of deal Other geopolitical Challenging
expectations/ from global bility or availability opportunities in risks fundraising
entry multiples and local PE funds at attractive rates play in the market environment

Performance
NA
(vs. 2018)
Share (2018) 68% 48% 29% 32% 3% 19% 13% 16% 16% 3% 23% NA

Note: No respondent selected the option “Climate change”

Sources: Bain Private Equity Survey 2019 (n=28); Bain Private Equity Survey 2018 (n=31)

31
4.
• India exits witnessed some slowdown in 2019
relative to the previous two years. That said, it
was the third-highest exit year of the last
decade at $12.8 billion. The fall over last
year’s $17 billion (excluding Flipkart) was
driven by a decrease in the number of exits
Exits: from 265 to 200.

Some slowdown • Most investors found the 2019 exit

environment more challenging than 2018.
IPO market unpredictability and
macroeconomic softness were highlighted as
key reasons for weak exit opportunities.

• The top 10 exits accounted for just over half of

total exit value. Three of the top exits were in IT
and ITES, two in consumer tech, and the rest
across consumer/retail, real estate and
infrastructure, BFSI, energy and healthcare.

• Most sectors have earned reasonable returns

on exits over the past five years, with return
multiples trending upwards. Consumer tech,
IT and ITES and BFSI reaped the highest
multiples on invested capital.

• Investors attributed successful exits to strong

management teams, market growth and
clear exit strategy. Management issues
and unfavorable disruption in the industry
post-close were cited in exits that weren’t
so successful.
 India Private Equity Report 2020

Figure 4.1: India PE exits finished 2019 slightly below the last two-year levels, excluding Flipkart

Annual exits in India ($B)

40

Includes the $16B

Flipkart acquisition 32.9

30

20
15.7
12.8

10 9.4 9.6
6.6 6.8 6.8 6.0
4.1

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
–25%
Number 123 88 115 164 193 213 197 211 265 200
of exits

Notes: Includes real estate and infrastructure exits; no filter on exit value has been applied to the overall figures; number of exits includes deals where exit value is not known
Source: Bain PE exits database

Figure 4.2: Exit momentum slowed with a decline in both exit value and volume

Exit volume in India Total value of exits in India ($B)

300 40
–25%
265
32.9

30
200
200
Flipkart

20
–24%

100 12.8

10

0 0
2018 2019 2018 2019

Notes: Includes real estate and infrastructure exits; no filter on exit value has been applied to the overall figures; exit volume includes deals where exit value is not known
Source: Bain PE exits database

34
 India Private Equity Report 2020

Figure 4.3: Investors cited IPO market unpredictability and macroeconomic softness as reasons for
weak exit opportunities in 2019
How was the exit environment in 2019 compared What do you see as the principal reasons for sub-optimal
with 2018? exit opportunities in 2019?

60% 80% 74
53

60 58
40
42
40
32 32
21 21
20
20
11
5
0 0
Far more Somewhat Very Less IPO market Market Better value
challenging more similar to challenging unpredictability conditions creation
challenging last year expected to opportunities
improve in future
in future

Macroeconomic Lack of Low exit

softness leading secondary/trade valuations
to fewer buyers sale options

Source: Bain Private Equity Survey 2019 (n=28)

Figure 4.4: Strategic sales were the most common exit mode, while IT and ITES, and consumer
tech had the highest number of exits across sectors
Number of exits by mode of exit CAGR Number of exits by industry
(’18–’19)

211 265 200 211 265 200

100% 100%
Buyback –58%

Secondary Other
–49% industries
sale
80 80

Public Healthcare
60 market –42% 60 Consumer/
sale retail

BFSI
40 40

Consumer
Strategic technology
31%
20 sale 20

IT and ITES

0 0
2017 2018 2019 2017 2018 2019

Notes: Includes real estate and infrastructure exits; no filter on exit value has been applied to the overall figures
Source: Bain PE exits database

35
 India Private Equity Report 2020

Figure 4.5: A few large exits dominated, with the top 10 exits accounting for over half of the total
exit value
Exits by transaction size ($B) Target Exiting firms Sector Value ($M) Route

Oyo Lightspeed Venture Partners, Consumer ~1,500 Buyback

Sequoia Capital technology

32.9 12.8
100% GMR Airports Macquarie-SBI Infrastructure Investments, Real estate ~1,170 Secondary sale
Standard Chartered, JM Financial

Other CitiusTech General Atlantic IT and ITES ~880 Secondary sale

80
Ruchi Soya Siva Ventures, Devonshire Capital, Consumer/ ~630 Strategic sale
Industries Albula Investment Fund retail

60
Genpact GIC Special Investments, Bain Capital IT and ITES ~620 Public market

Flipkart SBI Life The Carlyle Group BFSI ~390 Public market
40 Insurance

Top 10 Amplus Energy ISQ Global Infrastructure Fund Energy ~390 Strategic sale
Solutions
deals
20
Top 9 Medanta The Carlyle Group, Temasek Healthcare ~380 Strategic sale
deals
0 Yatra Intel Capital, Norwest Venture Partners, Consumer ~340 Strategic sale
Chiratae Ventures, Capital18, technology
2018 2019 Reliance Ventures, Other

Top 10 ~70 ~50

Genpact GIC Special Investments, Bain Capital IT and ITES ~320 Public market
deals (%)

Note: Represents exits where value was reported and available

Source: Bain PE exits database

Figure 4.6: Return multiples are trending upwards; exits in consumer technology, IT and ITES and
BFSI have been more successful than others
Multiples on invested capital for exits Multiples on invested capital for exits, 2012–2019

4 3.9 6
5.5

3.1 4.8
2.9
3
4 3.8
3.4 Average 3.5
3.3 3.2
2 2.5

2 1.7
1

0 0
2014–15 2016–17 2018–19 Consumer BFSI Manufacturing Consumer/
technology retail

IT and Healthcare Shipping/ Real estate

ITES logistics and
infrastructure

Count 73 48 63 Average 141 176 108 77 79 56 45 72

deal size ($M)

Avg. holding 3.4 5.8 4.1 5.0 4.7 4.3 3.4 4.7
period (years)

Notes: MoIC calculation: (distributions + unrealized value)/paid-in capital; simple average of MoICs considered; overall MOICs available for ~25% of exits from 2012–19
Source Bain PE deals database

36
 India Private Equity Report 2020

Figure 4.7: Strong management teams, market growth and clear exit strategy are key to
deal success
What are the main sources of deal success for the recent exits you have had?

Share of respondents selecting each option

100%

83
80

60 56 56

40
33

20 17 17

0
Very strong Strong market Very clear and keen Share gain on Successful entry into Meaningful cost
management growth buyers at exit the back of some adjacent products, reduction or other
strong competitive customers or source of margin
advantage geographies growth

Source: Bain Private Equity Survey 2019 (n=28)

Figure 4.8: Management issues and unfavorable disruption in industry post-close were cited most
often in less successful exits
In situations where exits were not as successful, which of the following reasons apply?

Share of respondents selecting each option

100%

80

67
61
60
50

40
28

20
11

0
Management issues Unfavorable/unforeseen Macro-economic Misunderstood growth Unrealistic margin
(capability, bandwidth, disruption post-close headwinds opportunity in diligence improvement
alignment) in industry/competitive baked into plan
dynamics

Source: Bain Private Equity Survey 2019 (n=28)

37
 India Private Equity Report 2020

Figure 4.9: Investors believe top-line growth and cost/capital efficiency will be the largest creators
of future value
What was the biggest contributor of return on the deals you exited, and how do you see it changing over time?

Share of respondents selecting each option

80%
71
65
60

40 36
Current Expected
in 5 years 28
25
20 17 19
13 13

0
0
Top line growth Cost improvement Multiple expansion M&A Leverage
and capital efficiency

Source: Bain Private Equity Survey 2019 (n=28)

Figure 4.10: Overall, a good exit track record will be important to pave the way for more
investments in the future
Significant overhang of PE investments over the last 10 years

Total investments and exits ($B)

200

$158B
Cumulative
150
investments

$97B
100
Cumulative
exits

50

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Notes: Includes only deals with known value; excludes real estate, infrastructure and energy deals
Source: Bain PE deals and exits database

38
India Private Equity Report 2020

39
5.
• Over the next few years, investors see
attractive investment opportunities in SaaS
and cross-sector x-tech in India.

• The underlying India SaaS market is forecast

to grow from about $6 billion in 2019 to more
than $20 billion in 2022.
Sectors in focus:
SaaS and fintech • The investment value in SaaS rose to $1.3
billion, a 60% increase over the last year’s
$840 million. Horizontal business software
was the largest subsegment in 2019 and
grew in deal volume.

• Investors look for large addressable market,

established proof of concept, strong customer
stickiness, diversified customer base, high
degree of product standardization, marquee
customers in quality conscious global markets
and cost-competitiveness, as they evaluate
SaaS companies for investment.

• Fintech is the largest cross-sector x-tech

segment in India, both in terms of deal value,
at $2.4 billion and deal volume at 83.
Payments and lending were the largest
subsegments and witnessed maximum growth
over the previous year.

• Lending is expected to be an attractive

opportunity due to the large unaddressed
MSME debt demand. Multiple archetypes
of lenders including banks, nonbanking
financial companies, fintech firms and
e-commerce players are trying to tap into
this new opportunity.
 India Private Equity Report 2020

Figure 5.1: SaaS and cross-sector “x-tech” are expected to drive investments in the coming years
in India
Which technologies/sub-sectors do you expect your firm will focus on in the next 3 to 5 years?

Software as a Service (SaaS) 81

Cross sector “x-Tech” 67
Other B2C internet & online services 62
B2B-focused internet & online services 57
E-Commerce 48
IT services 48
Artificial intelligence/machine learning 38
Tech infrastructure 29
Traditional software (non-SaaS) 24
Internet of Things 10
Semiconductors & components 10
Network equipment 5

0 20 40 60 80 100%
Share of India respondents selecting each option

Source: Bain Private Equity Survey 2019 (n=28)

Figure 5.2: Underlying India SaaS market is forecast to grow from about $6 billion in 2019 to
more than $20 billion in 2022
Indian SaaS market ($B)

30 CAGR
(2018–2022)
Range of forecasts
for global SaaS growth

22

20

Global 50%
10

Domestic 35%
0
2019 2022

Sources: IDC; NASSCOM; Gartner; SMB cloud market in APAC region (Technavio); India SaaS survey 2017 (Signal Hill, Ispirit; n=70); Bain analysis

42
 India Private Equity Report 2020

Figure 5.3: Indian SaaS companies are targeting both enterprises and SMBs across domestic and
global markets due to the large opportunity across all four quadrants

Increasing digital penetration across Fast-growing demand for higher degree

key verticals like banking, healthcare, of verticalization in several enterprise-focused
Enterprise

education and government software; cost competitive, high-quality offering

vs. global peers due to high-quality domestic talent

Examples: Practo, Freight Tiger Examples: Zenoti, MindTickle, SirionLabs

Customer scale

Increasing software adoption by SMBs Underpenetrated, fast-growing

in the burgeoning domestic market global SaaS SMB market; cost arbitrage vs.
global peers in providing high-quality engineering
SMB

talent as well as contact center services

Examples: MyGate, OKCredit Examples: Freshworks, Zoho, Wingify

India (domestic) Global

Customer geography

Source: Bain analysis

Figure 5.4: SaaS companies can be classified into three distinct archetypes; and all had
investment growth in 2019
Archetypes of software/SaaS companies Split of investments in software/SaaS

Archetype Description Subsegments Illustrative list of players India: SaaS investments by type CAGR
($B) (2018–19)
Vertical- Software used to Fintech Vymo, PayNearby 0.8 1.3 57%
specific support business 100% Vertical-
business processes in specific 294%
Other (health tech, edu tech) POSist, Practo, Locus business
software specific verticals
software
Security Druva, K7, Lucideus 80 Horizontal
infra 90%
software
Horizontal Software used to App. dev. and deployment BrowserStack, Progress,
intra build, run and Wingify
manage the 60
software Other infra (data mgmt., IndusOS, iValue
performance of
IT resources middleware, storage mgmt.,
data integration, IT ops)
40
Horizontal
Horizontal Software used to CRM, omni-commerce, Freshworks, InMobi
support business martech business 34%
business software
software processes in
BI/analytics Dataweave, Moengage,
companies 20
Crayon
across verticals
Content, comm. Ameyo, Flock, Wooqer
and collaboration
ERP and others SirionLabs, MindTickle, 0
(SCM, HCM, F&A) Whatafix 2018 2019

Note: Deal volume includes deals where value is unknown, while average deal value is only for deals with a known value
Source: Bain PE deals database

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Figure 5.5: Horizontal business software was the largest SaaS subsegment in 2019, with growth
resulting from an increase in deal volume
India: Deal volume for SaaS India: Average deal value for SaaS
subsegments subsegments ($M)

120 20
37%
97 23%
100 14.5
15
71 11.8
80
10
60

40 5

0 0
2018 2019 2018 2019
Segment 2018 2019 CAGR Segment 2018 ($M) 2019 ($M) CAGR
Horizontal 52 72 38% Horizontal 12.4 12 –3%
business business
Horizontal infra 11 17 55% Horizontal infra 13.7 16.6 21%
Vertical 8 8 0% Vertical 5.5 21.8 296%
business business

Note: Deal volume includes deals where deal value is unknown whereas average deal value is only for deals with known value
Source: Bain PE deals database

Figure 5.6: Top 10 deals accounted for about 65% of the total deal value in 2019; and the
horizontal business software segment attracted 8 out of top 10 deals
Annual investments in SaaS ($B) Company SaaS segments Funds Value ($M)

Freshworks Horizontal business Accel, CapitalG, Sequoia Capital 150

1.3 Druva Horizontal infra Nexus Venture Partners, Riverwood Capital, Tenaya 130
100% Capital, Neuberger Bergmann, Atreides Management

Icertis Horizontal business Eight Roads, Greycroft, Ignition Partners, B Capital Group, 115
Meritech Capital Partners, Cross Creek, PremjiInvest,
80 Other PSP Investments

Near (Allspark) Horizontal business Greater Pacific Capital 100

60
OkCredit Horizontal business Lightspeed Venture Partners, Tiger Global Management 67

Harness Horizontal business Innoventure Partners, GV, ServiceNow, Menlo Ventures, 60

40 Unusual Ventures

Top 10 deals ContractPod Vertical business Insight Partners, Eagle Proprietary Investments 55
Technologies
20
Uniphore Horizontal business Chiratae Ventures, IP Group, March Capital Partners, 51
Patni Wealth Advisors

0
FourKites Horizontal business Bain Capital, August Capital, Hyde Park Angels, 50
2019 CEAS Investments

Top 10 ~65%
MineralTree Horizontal business Great Hill Partners, Eight Roads, .406 Ventures 50
deals (%)

Note: Does not include deals where deal value is unknown

Source: Bain PE deals database

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Figure 5.7: Investors look for key markers in evaluating SaaS companies for investment

Playing in a large addressable market (typically $1 billion-plus), with a focus on niche underpenetrated verticals such
as scheduling software for spas and salons, or a differentiated horizontal software offering such as AI-enabled CRM

Established proof of concept (minimum scale of ~$1 million ARR) with robust growth (typically 100%+ annual ARR growth)

Strong customer stickiness (an annual revenue churn of <10%) driven by both positive customer feedback
and high switching costs (solutions that require significant end-client data migration)

Diversified customer base (typically top 10 contribute <50%) with limited concentration of start-ups or customers
with high insourcing risk

High degree of product standardization (limited custom solutions at premium pricing) to propel scalability

Track record of selling software solutions to stable or large customers in competitive and quality-conscious
global markets, especially the US market

Leveraging high-quality India-based STEM talent to drive cost competitiveness vs. global peers

Figure 5.8: Fintech is the largest cross-tech segment in India in deal value and deal volume

Cross-tech deal value in India ($B) Cross-tech deal volume in India

7 300 292
6.6
Other Other
6 Food tech
RE tech e-Mobility
6.3
Media and entertainment Media and entertainment
e-Mobility 211
5 RE tech
Edt ech 200 Food tech
Mobility Mobility
4

Ed tech
3 Health tech

100 Health tech

2

Fin tech
1 Fin tech

0 0
2018 2019 2018 2019

Notes: Others include various sectors such as logistics, gaming, online travel and social network; deal volume includes deals where value is unknown
Source: Bain PE deals database

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Figure 5.9: Lending and payments contributed nearly 80% of fintech investments in 2019 and
witnessed maximum growth over the last year
Split of fintech investments by subsegment ($B) CAGR
(18–19)

0.7 2.4 230%

100%
24%
Wealth management
11%
80

76%
Insurtech
60

Driven by Paytm’s
40 $1 billion deal

20 Lending
1153%

10
Payments
0
2018 2019

Source: Bain PE deals database

Figure 5.10: Increased deal volume across fintech subsegments led to substantial growth

Deal volume for fintech Average deal size for fintech

subsegments subsegments ($M)

100 40
70% 83
80
30 92% 28.0

60
49
20
40 14.6

10
20

0 0
2018 2019 2018 2019
Key segments 2018 2019 CAGR Key segments 2018 ($M) 2019 ($M) CAGR
Payments 15 21 40% Payments 8 70 775%
Lending 23 43 87% Lending 10.8 10.3 –5%
Insurtech 5 7 40% Insurtech 50.1 41.8 –17%
Wealth 6 12 100% Wealth 15.7 9.7 –38%
management management

Note: Deal volume includes deals where deal value is unknown whereas average deal value is only for deals with known value.
Source: Bain PE deals database

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Figure 5.11: Top 10 deals account for about 75% of the total deal value in 2019 with payments
comprising 6 of the top 10 deals
India: Investments in Fintech ($B) Company Fintech segments Funds Value ($M)

Paytm Payments Ant Financial Services Group, SoftBank, D1 Capital Partners, 1,000
Discovery Capital, T. Rowe Price

2.4
100% PolicyBazaar Insurtech Tencent Holdings 150

CRED Payments RTP Global, Sequoia Capital, Ribbit Capital, Tiger Global 120
Other Management, Hillhouse Capital, Greenoaks Capital Partners,
80 Dragoneer Investment Group, General Catalyst Partners,
DST Global

Tala Lending Lowercase Capital, DCVC Data Collective, IVP, GGV Capital, 110
60 Thomvest Ventures, Revolution Ventures, RPS Ventures,
PayPal Ventures

Razorpay Payments Tiger Global Management, Ribbit Capital, Sequoia, Y Combinator 75

40
Top 10 deals
Acko Insurtech Intact Ventures, RPS Ventures, Amazon, Techpro Ventures, 65
Accel, SAIF Partners
20
Zeta Payments Sodexo 60

Perfios Software Lending Bessemer Venture Partners, Warburg Pincus 50

0
2019 BharatPe Payments Ribbit Capital, Steadview Capital, Sequoia Capital 50

Top 10 ~75%
NiYO Payments Horizons Ventures, Tencent Holdings, JS Capital 35
deals (%)

Note: Does not include deals where deal value is unknown

Source: Bain PE deals database

Figure 5.12: Micro, small and medium enterprise lending is expected to grow in coming years
due to the large unaddressed debt demand
Micro, small and medium enterprise debt demand (FY 2018, 2023E, $B)

1550–1650
1,600

1,200

850–950
800–850
800 750–800

Informal
450–500
400–450
400

Formal
0
2018 2023E 2018 2023E 2018 2023E

Formal debt 30–35% ~40% 25–30% ~35% ~40% 40–45%

penetration

Total Short term Long term

Source: Ministry of Micro, Small and Medium Enterprises; International Finance Corporation (IFC); Accord database; Bain analysis

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Figure 5.13: Four broad archetypes of lenders trying to tap into the unaddressed micro, small and
medium enterprise lending opportunity

Banks • Offer largely secured and high-ticket-size loans to medium enterprises

• Differentiation: Fund availability, competitive interest rates and long-standing relationships

Nonbanking • Focus more on small enterprises than banks; NBFCs targeting emerging micro
financial companies and small enterprises
• Differentiation: Faster turnaround time and less documentation compared with banks

Fintechs • Focus on unsecured short-term capital to micro, small and medium enterprise (MSME)
with smaller ticket sizes (including alternate lending products)
• Greater risk appetite and nontraditional credit risk assessment methods allow lending
to underserved segments
• Current and potential player types: Fintech lenders, MSME marketplaces, payment players
and business platforms
• Differentiation: Extremely fast turnaround times and lesser documentation compared
to NBFCs; provide higher flexibility in terms of loan tenure and repayment methods

E-commerce • Partner with fintechs and NBFCs to provide unsecured loans for short periods;
players emerging or soon-to-emerge as standalone players
• Differentiation: Lower customer acquisition costs due to existing relationships with sellers

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About Bain’s Private Equity practice

Bain & Company is the management consulting firm the world’s business leaders come to when they
want enduring results. Together, we find value across boundaries, develop insights to act on and
energize teams to sustain success. We’re passionate about always doing the right thing for our
clients, our people and our communities, even if it isn’t easy. Bain advises clients on strategy,
operations, technology, organization, private equity, and mergers and acquisitions. We develop
practical, customized insights that clients act on and transfer skills that make change stick. Founded
in 1973, Bain has 58 offices in 37 countries as well as deep expertise and a long client roster across
every industry and economic sector. Our clients have outperformed the stock market 4 to 1.

Bain is also the leading consulting partner to the private equity industry and its stakeholders. Private
equity consulting at Bain has grown eightfold over the past 15 years and now represents about one-
quarter of the firm’s global business. We maintain a global network of more than 1,000 experienced
professionals serving PE clients.

In India, we have a leadership position in PE consulting and have reviewed most of the large PE
deals that have come to the market. Our practice is more than triple the size of the next-largest
consulting firm serving private equity firms both globally and within India.

Bain’s work with PE firms spans fund types, including buyout, infrastructure, real estate and debt.
We also work with hedge funds, as well as with many of the most prominent institutional investors,
including sovereign wealth funds, pension funds, endowments and family investment offices. We
support our clients across a broad range of objectives:

Deal generation. We help develop differentiated investment theses and enhance deal flow, profiling
Industries, screening companies and devising a plan to approach targets.

Due diligence. We help support better deal decisions by performing due diligence, assessing
performance improvement opportunities and providing a post-acquisition agenda.

Immediate post-acquisition. We support the pursuit of rapid returns by developing a strategic

blueprint for the acquired company, leading workshops that align management with strategic
priorities and directing focused initiatives.

Ongoing value addition. We help increase a company’s value by supporting revenue enhancement
and cost reduction and by refreshing strategy.

Exit. We help ensure funds maximize returns by identifying the optimal exit strategy, preparing the
selling documents and prequalifying buyers.

Firm strategy and operations. We help PE firms develop their own strategy for continued excellence
by devising differentiated strategies, maximizing investment capabilities, developing sector

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specialisation and intelligence, enhancing fundraising, improving organizational design and decision
making, and enlisting top talent.

Institutional investor strategy. We help institutional investors develop best-in-class investment

programs across asset classes, including PE, infrastructure and real estate. Topics we address cover
asset-class allocation, portfolio construction and manager selection, governance and risk
management, and organizational design and decision making. We also help institutional investors
expand participation in PE, including through coinvestment and direct investing opportunities.

About Indian Private Equity & Venture Capital Association

IVCA is the oldest and most influential PE and VC Industry body in India, with a focus on promoting
the AIF asset class within India and overseas. IVCA’s mission is to promote a healthy environment
for the growth of private equity and venture capital which is much needed to support economic
growth, good governance, entrepreneurship, innovation, and job creation in India.

IVCA stands for the values of good governance, protecting the environment and reducing poverty
through growth of the private sector. It establishes high standards of governance, ethics, business
conduct and professional competence. We reach out to the far-flung areas of India and also assist on
a global scale to contribute significantly.

IVCA is a nonprofit organization powered by its members. The members are influential firms from
around the world, including private equity and venture capital funds, corporate advisors, lawyers and
institutional advisors.

Considering the crucial role our industry plays in the economy, IVCA aims to:

• Develop and promote India’s private equity sector and actively demonstrate its impact to the
government, media, and the public at large.

• Establish high standards of ethics, business conduct and professional competence.

• Serve as a platform for investment funds to interact with each other and develop India’s PE and
VC industry ecosystem.

How we do it:

• With noteworthy committee members on our panel, we advocate for a seamless private equity
and venture capital industry in India by representing the views and concerns of our members in
front of governmental and other relevant bodies, thereby promoting pro-growth public policy
initiatives, international best practices and standards.

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• Having members from leading PE and VC firms, institutional investors, corporate advisers,
lawyers and other service providers, IVCA serves as an unequalled platform for investment funds
to interact with each other and develop the ecosystem.

• We provide a professional development forum for members and those interested in the venture
capital and private equity industry through educational and training events. IVCA also has a
partnership with Invest Europe, focused exclusively on the professional development of
investment professionals.

• In association with its knowledge partners, IVCA promotes, researches and analyses private
equity and venture capital in India, and collects and disseminates commercial statistics and
information related to the private equity and venture capital industry.

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About the authors

Arpan Sheth is a partner in Bain & Company’s Mumbai office. He leads the firm’s Asia-Pacific
Technology, Vector and Advanced Analytics practices, as well as India Private Equity and Alternative
Investor practice. Sriwatsan Krishnan is a partner with Bain’s Mumbai office and is a leader in the
Private Equity practice in India. Aditya Shukla is a partner with Bain’s Mumbai office and is a leader
in the Private Equity practice in India. Prabhav Kashyap is a manager with Bain’s New Delhi office
and is a leader in the Private Equity practice in India.

Acknowledgements
The authors would like to thank Pranay Mohata for his contributions to the report.

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Bold ideas. Bold teams. Extraordinary results.

Bain & Company is a global consultancy that helps the world’s most
ambitious change makers define the future.
Across 58 offices in 37 countries, we work alongside our clients as one team with a shared ambition to
achieve extraordinary results, outperform the competition and redefine industries. We complement
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success of our clients. We proudly maintain the highest level of client advocacy in the industry, and our
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For more information, visit www.bain.com