As much as 90% of private equity and venture capital investors envisage a decline in fund-raising activities over the next 6 to 12 months because of the COVID-19 pandemic, a Crisil Research survey showed on Tuesday.
According to the survey report, though the market is sitting on sufficient un-invested capital, or 'dry powder’, good investment opportunities are seen as difficult to find in the current environment.
"About 58 per cent surveyed expect investment value to decline over the coming 12 months," the report said.
"About half of them see a moderate recovery thereafter, while a fifth foresee a strong recovery."
As per the survey, two-thirds of investors see mergers and acquisitions (M&As) rising over the next 6-12 months, extending up to the next 1-2 years, and more than three-fourths see a rise in M&A activity in the 1-2 years, compared with 2019.
"With exit options limited because of weak capital market and low interest in secondary transactions from other funds, investors would look at M&As as a strategic route to check out," said Rahul Prithiani, Director, Crisil Research.
"M&A transactions with stronger players would be the more-likely option subject to demand contours and growth opportunities, extent of synergy, and availability of capital for acquisition."
Resultantly, investment decisions are expected to be delayed given the due-diligence criticality and including new parameters for evaluation in the post-pandemic world.
"Investors expect to focus on segments minimally impacted by the pandemic or those with promising opportunities, such as technology, e-commerce and healthcare," the report said.
"Over a longer term, these segments would see positive structural changes, which will drive stronger growth due to changing consumer behaviour."
Accordingly, e-commerce, technology, information technology and IT-enabled services, financial services, and lately, infrastructure and real estate have dominated the private investment market.
"Healthcare is a key sector that will garner even more interest and attention post pandemic," the report said.