The situation during the ongoing COVID-19 will be grim and the recovery thereafter will also take time as private equity experts fear that more people will die from hunger than pandemic in India most people under estimating the gravity and period of impact, which at the very least will take two to three quarters.
At a private equity webinar, Shailendra Singh, Managing Director at Sequoia Capital flagged that fear that more people will die from hunger than pandemic in India.
He added that most people are under estimating gravity and the period of impact, which will be the at the very least two to three quarters.
Singh said they are asking every portfolio co to re validate the 5 critical assumptions their business hinges on. "You will be surprised that how many of them have actually changed/ could change in long run (Zivame)," he added. They have also advised companies to look at adjacent markets or alternative business models.
Singh said that economic Recovery will not start before Q3/Q4 of this financial year. Most countries will move manufacturing towards domestic markets especially in healthcare & R&D and reliance on China will go down.
Anuj Ranjan of Brookfield said that cycles are inevitable, it will come back but will take time. After 9/11, no-one thought they would ever get on a plane again. But they did and it was much stronger than before, but in 22 months. Air travel started but the security changed forever.
Ranjan added that the government right now is like an ICU doctor – keeping the economy (patient) in induced coma, till cure is found (vaccine -- 2 years)
In terms of private equity it will be a will be a flight back to US and North America. Since valuations will come off significantly, PE will be less inclined to take emerging market/currency risks, when returns are good there.
Hospitality will come back, but will take time. Real estate investors will find good deals in six months and the wedding season will drive this.
Ranjan said retail will be badly hit and Brookfield expects significant bankruptcies in SME retail/mom & pop/restaurants as 6 weeks of no revenue will bankrupt them.
Consumption will come back, but in six months or more. This event has given a big push to the existing trend to e-commerce. Some malls in US died, but many are flourishing – the ones that have turned to experience centres, he added.
Kunal Shroff of Chryscapital said that risk has increased through the roof. The new deals are on hold or slow. All exits are delayed, private equity funds are focussing on portfolios just now to preserve liquidity, draw cash lines, no capex and extend the cash burn.