The COVID-19 pandemic has not only affected the health of millions around the world but has also had a damaging effect on some of its leading economies.

To control the spread of COVID-19, India went on a nationwide lockdown in the month of March which has been extended in some form or the other up until now. Despite these efforts, the number of COVID-19 cases in India has still been increasing rampantly. The ever-extending lockdown has brought about a lot of uncertainties in the Indian markets which has negatively impacted the private equity deal landscape in India.

Market Trend

According to the recent market research reports of PwC, private equity deals including strategic mergers and acquisitions in India have declined by 14 percent to USD 38.4 Billion in the first half of 2020 compared to 2019. During the financial crisis of 2008, deal making came to a complete standstill in the short run. Similarly, it is predicted that this pandemic will have a similar impact. The key element on the basis of which private equity investors base their investments is on the future projections of the financials of a company. With the current pandemic situation in India, it is difficult for any investor to gauge the financials of any company for the Financial Year 2021.  Additionally, investors at this point are more engaged in managing their current portfolio of investments and stabilizing them. The sellers on the other hand do not want to part with their assets at this juncture as the valuation of their assets will be much lower in the current market. In our view, by the end of 2020, once the pandemic situation in India stabilizes, there shall be an increase in the flow of deals.

Change in the FDI Policy of India

In April 2020, in order to prevent opportunistic takeovers of Indian companies during the pandemic, the Government of India amended the Foreign Direct Investment Policy of India by introducing a regulation under which prior government approval is required for all direct or indirect foreign investments from countries sharing a land border with India (i.e. China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan). This policy change was triggered upon the People’s Bank of China raising its stake in India’s key commercial bank Housing Development Finance Corp. Ltd (HDFC) from 0.8% to 1.01% through open market purchases. Therefore, this policy change was mainly targeted to prevent investments of Chinese companies in India.

A large number of start-ups in India have received seed funding from Chinese private equity and venture capital funds. This move will definitely hamper the sentiments of Chinese investors in India and will reduce their ease of doing business in India. Many funds based in Singapore, Hong Kong and Taiwan are largely owned by their bordering countries. Investments from these funds in India will also require prior government approval which may in effect slow down investments.


Even in these difficult times, the Indian telecom and technology conglomerate, Reliance Industries Limited raised USD 15.2 Billion in 11 deals over two months amidst the pandemic, which reflects that the Indian economy shall continue to grow. Many economists are of the view that the next 10 years shall be extremely unique for the Indian economy. COVID-19 will change the business environment in India with sectors such as pharmaceuticals, education technology, e-commerce, logistics and FMCG taking the frontline for the investments.

With the falling stock prices and the market being bearish, the private equity investors have been holding on to cash for the past few months. We believe, with the steep drop in the valuation of assets in the current market, investors will eventually leverage on this factor and look to acquire assets at a lower price and achieve a higher return on such investments in the future.