Indian PE-VC investments cross $60 billion for 3rd straight year

India saw private equity and venture capital (PE-VC) investments of $61.6 billion in a difficult year, a slight moderation of 12% over 2021's peak value of $69.8 billion, according to Bain & Company.

India's share of private equity and venture capital investments in Asia-Pacific grew from 15% to around 20% from 2021 to 2022, as China + 1 tailwinds and India's macro robustness made it a bright spot for investing, amidst decelerating capital flow in the region, the global consultancy says in a report.

With more than 2,000 deals, the strong deal flow from previous years continued, according to Bain. Traditional sectors led by BFSI (banking, financial services and insurance), healthcare, energy and manufacturing demonstrated resilience and grew by 50% to around $28 billion aided by strong domestic consumer sentiment.

"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," says 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 says.

ESG emerged as a breakout theme in 2022, with investments in clean energy and EV accelerating, to reach nearly $7.9 billion, the report says. While sectors such as consumer tech and IT/ITeS segments saw a decline, healthcare investors had a remarkable year with marquee exits of healthcare providers through the year, it adds.

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 amid mounting geopolitical tensions and cascading macroeconomic challenges, says Bain & Company. 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, the report says, adding that buyouts also slowed due to gaps in valuation expectations and tighter credit markets.

"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," says Sriwatsan Krishnan, partner and leader of the Private Equity Practice, Bain & Company.

Venture capital continued to contribute significantly to deal volume in the year, however, saw a dip in average cheque sizes, the report says, adding that PE deal value remained relatively steady, despite lower volumes.

Traditional sectors dominated top deals, with the most notable deals in 2022 being in Media & Entertainment (Viacom18) and Banking (Yes Bank), followed by multiple large deals in energy and manufacturing, says the Bain report. Consumer tech and information technology (IT) sectors, which drove around 60% of deal value in 2021, contracted to nearly 30% in 2022, it adds.