Private Equity and Venture Capital Investments in India Fall 44% TO $3.5B: Reports

Private equity and venture capital funds saw a notable drop in their investments in May, with the total values plummeting by nearly 44% to USD 3.5 billion, according to a report published on Monday.

During May 2022, these dedicated funds had made investments amounting to $6.2 billion, followed by $7.4 billion in the preceding month of April 2023. This represents a significant decline of 44% and 52%, respectively, as highlighted in the report by industry lobby IVCA and consultancy firm EY.

Challenges in the Tech Sector

Despite witnessing a recovery in tech sector indices and some prominent global tech companies, the sentiment in India for tech sector investments has been lackluster. Additionally, fundraising activities by Indian startups have been sluggish, as acknowledged by Vivek Soni, a partner at the consulting firm. He emphasized that there is a substantial amount of dry powder available with the funds due to extensive fundraising over the past one-and-a-half years. However, most funds are cautious about deploying their capital and are dedicating significant efforts to managing existing struggling portfolios, focusing on growth and margin improvement.

Sector-specific Investments

The report reveals that only the healthcare and financial services sectors have experienced some investments. Soni expressed optimism about the medium- to long-term outlook, suggesting that the overall investments in 2023 will surpass the previous year's figures.

Deal Activity and Investments

In May 2023, the total volume of deal activity stood at 71 transactions, representing a 42 percent decline compared to the same period the previous year. Growth investments also witnessed a decline of 4 percent , totaling USD 1.9 billion across 17 deals, compared to USD 2 billion invested across 19 deals in May 2022. On the other hand, private equity and venture capital investments reached USD 2 billion across 62 deals, reflecting a 52 percent decrease in value.

Preferred Sectors and Exits

Real estate emerged as the favored sector for funds in May 2023, recording PE/VC investments of USD 1.2 billion across seven deals. This shows an increase from the previous year, with 12 deals worth USD 1.1 billion in May 2022. The technology sector ranked second, with USD 864 million invested across 15 deals, indicating a substantial rise of 159 percent compared to May 2022. Additionally, the month witnessed 20 exits amounting to USD 1.8 billion, a significant increase from USD 511 million in May 2022 and USD 1.6 billion in April 2023.