Private equity (PE) and venture capital (VC) investments grew 33 per cent sequentially in 1H23 to touch $27.5 billion ($20.6 billion in 2H22), reveals the latest IVCA-EY PE/VC monthly round-up.

The investment flows for the first half of this calendar year spanned 427 deals, including 60 large deals. In value terms, it was, however, down 23 per cent compared to the same period last year, the report showed.

However, by number of deals, 1H23 is 16 per cent and 44 per cent lower than 2H22 and 1H22, respectively.

Exits were recorded at $9.4 billion across 139 deals in 1H23, almost 50 per cent of which were through large block/bulk deals in the open market.

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Sector-wise breakdown

The real estate sector received the highest value of PE/VC investments in 1H23 at $6.3 billion, 53 per cent higher than 1H22 ($4.1 billion).

The healthcare sector has emerged as a new sector of interest for PE/VC investors, recording $3.1 billion, the highest ever in the sector. 

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E-commerce and technology sector investments continue to be impacted amid sectoral headwinds and negative sentiment due to declining valuations and governance issues in some start-ups, recording 79 per cent and 45 per cent y-o-y declines, respectively (in value).

Positive overall trend

Vivek Soni, Partner and National Leader, Private Equity Services, EY said that H1 investment performance this year marks a reversal in the declining trend of the past two periods amid global headwinds of tightening liquidity and rising interest rates and inflation, maintaining a monthly average run-rate of $4.5 billion, which is 33 per cent higher than that observed in 2H22.

Notwithstanding global headwinds of rising interest rates and inflation as well as lingering geo-political tensions, PE/VC investments in India have been on an uptick over the past three quarters, he added.

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Although there has been a significant dip in PE/VC investments in start-ups, the overall trend for these investments in India remains positive, he noted.

“Going forward, India’s positioning as an attractive destination for PE/VC investments is expected to remain strong in 2023 and 2024, given its high growth and macroeconomic and policy stability”, Soni said.

Moreover, the large amount of funds raised in 1H23 ($10.2 billion) further augment the all-time high level of funds raised in 2021 and 2022 of $ 7.7 billion and $ 17.4 billion, respectively, which aggregate to a large pool of dry powder that needs to be deployed in India. 

Exits on strong footing

On a y-o-y basis, exits were lower by 2 per cent in terms of value in 1H23 ($9.4 billion) compared to 1H22 ($9.6 billion) and 8 per cent higher compared to 2H22 ($8.7 billion).

“Numerous open market exits through block/bulk deals have helped prop up the exit tally in 1H23 in the absence of large strategic exits. This is an emerging trend where newfound depth and liquidity in the listed space are enabling PE/VC funds to exit large stakes in listed companies at a minimal discount”, Soni said.

“This augurs well for the growth of the Indian PE/VC ecosystem, as we expect to surpass last year’s figures for both investment and exits in 2023 and look to create a solid foundation to exceed $100 billion of PE/VC investments in the next two years.”

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