India’s private equity, venture capital investments surpass $60 bn in 2022

India's private equity and venture capital investments surpassed $60 billion in 2022 for the third consecutive year amid global headwinds

New Delhi: India’s private equity and venture capital (PE-VC) investments surpassed $60 billion in 2022 for the third consecutive year amid global headwinds, a report showed on Wednesday.

The country’s share of PE-VC investments in Asia-Pacific grew from 15 per cent to 20 per cent from 2021 to 2022, as China tailwinds and India’s macro robustness made it a bright spot for investing, amidst decelerating capital flow in the region, according to Bain & Company’s “India Private Equity Report 2023” in collaboration with Indian Venture and Alternate Capital Association (IVCA).

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With more than 2,000 deals, the strong deal flow from previous years continued.

Traditional sectors led by the BFSI, healthcare, energy and manufacturing demonstrated resilience and grew by 50 per cent to $28 billion, enabled by strong domestic consumer sentiment.

Environmental, social and governance (ESG) emerged as a breakout theme in 2022, with investments in clean energy and EV accelerating to reach nearly $7.9 billion.

“Long-term prospects of the Indian market continue to be bullish, in spite of the near-term global slowdown. Robust fundamentals of the Indian economy make it an attractive destination for private equity, evident from the fact that India crossed $60 billion in investments for a third time in a row,” said Arpan Sheth, Bain & Company Partner and co-author of the report.

“India has also continued to increase its share of PE-VC investments in the Asia-Pacific region, with $1 of every $5 invested in the region being invested in Indian assets,” Sheth added.

While the first half of 2022 continued the momentum of 2021, the private investments ecosystem slowed in the second half as global sentiment turned conservative amidst mounting geopolitical tensions and cascading macroeconomic challenges.

“The mix of deals shifted, with mid-sized and small-sized deals gaining share in the overall deal value, while blockbuster deals of more than $1 billion were harder to come by. Buyouts also slowed due to gaps in valuation expectations and tighter credit markets,” the report said.

“We expect the short-term softness to continue with growth uncertainties, tight credit markets in the US and tempered public market valuations (and implied private valuations), leading to delays in deal closures with limited deployment pressure on investors,” said Sriwatsan Krishnan, Partner and Leader of the Private Equity Practice, Bain & Company.

India’s BFSI and fintech sectors have seen a resurgence in interest, with deals worth almost $10 billion in 2022, accounting for 18 per cent of the country’s PE-VC investments.

Post pandemic, India’s healthcare sector has emerged as an attractive bet for investors. With deals worth $4.3 billion in 2022, at approximately 8 per cent of total PE-VC investments, the sector dominated exits, commanding 16 per cent of total exit value.

Investments in ESG assets more than doubled, from around 5 per cent over the last few years to 13 per cent of India’s overall PE-VC investments to 2022, witnessing nearly $7.9 billion in deal value.