Private equity and venture capital (PE/VC) investments were down 29 per cent year-on-year (YoY) in 2022, to $54.2 billion across 1,211 deals, including 129 large ones (worth over $100 million, totalling $36.7 billion). This compares with $75.9 billion in investments across 1,269 deals the previous year, according to the IVCA-EY monthly PE/VC roundup.
Despite this decline, 2022 marks the second-best year for PE/VC investments in India to date.
“This (decline) was primarily due to a fall in deal sizes as the volume of deals remained fairly flat,” said Vivek Soni, Partner and National Leader, Private Equity Services, EY. “After a multi-year bull run, over the past five years, private equity investment and exit activity globally has been weighed down by inflation woes, recession fears, the rising cost of capital and elevated levels of uncertainty driven by geostrategic challenges,” he added.
In addition to global factors, domestic factors like the poor performance of IPOs of recently listed new economy companies has also affected PE/VC sentiment – that till recently were seeing IPOs as a viable exit option.
Following the poor performance of most start-up IPOs that listed in 2021, there was a lull in PE-backed IPOs for the most part of 2022. However, Q4 of 2022 saw a revival, with the listing of 10 PE-backed IPOs.
“In India, while investors reset their valuation appetite in March/April, sellers took time to get there, leading to a bid-ask spread in most transactions, which delayed and, in some cases, derailed PE-backed transactions for a large part of 2022,” said Soni.
This gap has, however, been closing in the last few months. The record level of India dedicated fundraises in 2022 totalling $17.4 billion, and the high level of dry powder available globally signal a strong rebound in PE/VC activity in India. Further, global LPs are also planning to increase their capital allocations for India.
“We expect the start-up space to continue receiving large investments, albeit at valuation multiples lower than 2021. There is high likelihood that Indian PE/VC investments in 2023 shall be meaningfully more than 2022 levels,” Soni said, adding that “Recession in the developed world, re-emergence of inflation, any flare-up in geo-political conflicts and potentially new and infectious Covid-19 variants remain key headwinds to watch out for in 2023.”
|
Total PE/VC Investments YoY Comparison ($bn) |
|
Year |
Value |
No. of Deals |
|
|
2017 |
54.2 |
596 |
|
|
|
2018 |
75.9 |
767 |
|
|
|
2019 |
47.5 |
1,029 |
|
|
|
2020 |
46.5 |
923 |
|
|
|
2021 |
37.4 |
1,269 |
|
|
|
2022 |
26.2 |
1,211 |
|
|
|
Sector-wise Investment Trends YoY comparison ($bn) |
|
Sector |
2022 |
2021 |
2020 |
|
|
Financial Services |
10.8 |
11.7 |
4.6 |
|
|
Infrastructure |
7.9 |
5.4 |
4.8 |
|
|
Real Estate |
5.8 |
5.3 |
5.7 |
|
|
Technology |
5.2 |
16.3 |
3.3 |
|
|
E-commerce |
5.1 |
16.1 |
2.8 |
|
|
Total PE/VC Exits ($bn) |
|
Year |
Value |
No. of exits |
|
2017 |
13.1 |
261 |
|
2018 |
27 |
176 |
|
2019 |
11.2 |
159 |
|
2020 |
5.9 |
151 |
|
2021 |
40.4 |
280 |
|
2022 |
18.3 |
249 |
|
Share of PE-backed IPOs in Total IPOs |
|
Year |
Non PE-backed |
PE-backed |
PE-backed as a % of total IPOs |
|
2017 |
17 |
22 |
56% |
|
2018 |
13 |
13 |
50% |
|
2019 |
7 |
10 |
59% |
|
2020 |
6 |
10 |
63% |
|
2021 |
25 |
44 |
64% |
|
2022 |
21 |
18 |
46% |
|
Total Funds raised YoY Comparison ($bn) |
|
Year |
Total Funds Raised |
Total no. of Funds Raised |
|
2017 |
5.7 |
44 |
|
2018 |
8.1 |
51 |
|
2019 |
11.6 |
56 |
|
2020 |
8.2 |
42 |
|
2021 |
7.7 |
73 |
|
2022 |
17.4 |
99 |
 "pe/vc funds, pe/vc investments")
