In a comprehensive analysis of the private equity and venture capital (PE/VC) landscape in India, the EY-IVCA joint report for the year 2023 reveals an 11% year-on-year dip in PE/VC investments. The decline is attributed to a significant drop in overall deal activity, with the number of deals plummeting by 33%.
Startups Segment: 42% Decline in Deals and 53% Drop in Investment Value: The report indicates that the startups segment witnessed a substantial 42% decline in the number of deals, leading to an even steeper drop of approximately 53% in the dollar value of investments. This downturn in startup investments raises questions about the funding landscape and investor sentiment in the startup ecosystem.
2024 Kick-Off: January Investments Surge: Despite the challenges observed in 2023, the PE/VC investments for 2024 have started on a positive note. January investments exceeded the previous month by 176% in terms of value and were 43% higher than January 2023. Pure play PE/VC investments, however, saw a notable 25% year-on-year decrease.
Resurgence in Real Assets and Healthcare: The report highlights a resurgence in real assets backed infrastructure and real estate asset classes, experiencing a robust 23% year-on-year increase. The infrastructure sector emerged as the leading recipient, attracting US$11.6 billion in PE/VC investments. Interestingly, traditional favorites like financial services, e-commerce, and technology recorded declines.
The healthcare sector emerged as a standout, witnessing a record high of US$5 billion in investments. The buoyancy in capital markets contributed to the second-best year for PE-backed initial public offerings (IPOs), with 30 IPOs compared to 18 in 2022.
PE/VC Exits: Surge with 36% Growth: PE/VC exits saw a remarkable 36% growth, reaching US$24.8 billion. Open market exits constituted 52% of total exits, achieving a historic high of US$12.8 billion.
Fundraising and Opportunities: India-focused fundraising recorded the second-highest dollar value of funds raised, totaling US$15.9 billion. The number of funds successfully raised reached an all-time high of 102. Despite challenges such as high valuations, regulatory uncertainties, and shifting investor sentiments, the report emphasizes that they also present opportunities for innovation and adaptation. Startups backed by strategic investments and prudent growth strategies are deemed poised to navigate through these challenges and emerge stronger.
