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India-focused private equity and VC funds raised $8.5bn in 2022, the highest ever annual fundraising value – Preqin reports

Defensive sectors in India divert investment attention away from traditionally popular sectors like IT

SINGAPORE, Sept. 21, 2023 /PRNewswire/ — Preqin, the global leader in alternative assets data, tools, and insights, published its Private Equity and Venture Capital in India 2023: Preqin Territory Guide report. In collaboration with an esteemed partner, the Indian Venture and Alternate Capital Association (IVCA), this report is the official publication for the ‘IVCA Maximum India Conclave – Singapore‘. The report shows how India’s private equity and venture capital (VC) sector adeptly navigated a shifting economic and geopolitical landscape over the past three years. It remained resilient despite significant disruption, emerging stronger with larger, more effective funds focused on identifying high-quality deals.

Global macroeconomic challenges impact private equity and VC deal value in India

2021 was a watershed year for India’s private equity and VC players. Fuelled by strong tailwinds such as a global public market rally and historically low interest rates, the industry reached unprecedented heights. In contrast, there was a sharp drop in activity in 2022 primarily due to growing global macroeconomic challenges. As a result, aggregate deal value saw a sharp drop of 42% from a record $60bn in 2021 to $35bn in 2022.

Meanwhile, fundraising remains strong. In 2022, 70 India-focused private equity and VC funds closed, raising an aggregate $8.5bn, which is the highest ever annual fundraising value.

Investors demonstrate changing sectoral preferences

Defensive sectors such as healthcare and energy & utilities have shown growth in India, diverting investment attention away from traditionally popular sectors like IT. Private equity and VC deals in IT experienced a sharp decline, plummeting from an aggregate value of $26.3bn in 2021 to $8.3bn in 2022. This slowdown has continued this year, with IT deal value shrinking to $1.7bn in the first seven months of 2023.

More investors, local and global, seek quality assets

As private equity and VC players in India navigate uncertain market times, there has been a fundamental shift in their investment approach. They are increasingly focusing on fewer, higher-quality assets and driving value creation within their portfolios. This is healthy for the ecosystem and will likely lead to the creation of robust businesses that can stand the test of time.

The annual number of funds closing has more than tripled over the last decade. GPs in India are also raising and closing larger funds, with the average fund size almost doubling from $72.3mn in 2013 to $121.4mn in 2022.

Rajat Tandon, President of IVCA says, “Amidst global economic challenges, India’s private equity and VC sector has demonstrated remarkable resilience, positioning itself as the third largest destination for private investment in terms of deals value. Furthermore, looking at data of nine years, India’s exit market has undergone significant deepening and diversification over the years, with aggregate exit value nearly quadrupling and more LPs discovering more accessible pathways. This transformative phase in the Indian investment landscape is characterized by changing sectoral preferences and a growing focus on quality assets, marked by a surge in fundraising, larger funds, and more efficient capital deployment. These developments foreshadow a promising future for our ecosystem, nurturing the growth of enduring businesses.”

Harsha Narayan, Managing Editor, and lead author of the report at Preqin, says “As private equity and VC players in India navigate these uncertain times, there has been a fundamental shift in their investment approach. These investors are increasingly focusing on fewer, higher-quality assets and driving value creation within their portfolios.”

Additional key findings from Private Equity and Venture Capital in India 2023: Preqin Territory Guide include:

  • AUM: India-focused private equity and VC AUM reached $68bn by the end of December 2022.
  • Dry powder: Private equity dry powder levels grew from $4.8bn to $5.8bn in 2022, while VC dry powder jumped from $6.3bn to $9.8bn.
  • Sector: There was a 68% drop year-on-year in private equity and VC deal value in India’s IT industry, the most affected sector, by the end of December 2022.

About Preqin

Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for almost 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.

About IVCA

Indian Venture and Alternate Capital Association (IVCA) is a not-for-profit, apex industry body promoting the alternate capital industry and fostering a vibrant investing ecosystem in India. IVCA is committed to support the ecosystem by facilitating advocacy discussions with the Government of India, policymakers, and regulators, resulting in the rise of entrepreneurial activity, innovation and job creation in India and contributing towards the development of India as a leading fund management hub. IVCA members are the most active domestic and global VCs, PEs, funds for Infrastructure, Real Estate, Credit funds, Limited Partners, Investment Companies, Family offices, Corporate VCs and Knowledge Partners. These funds invest into emerging companies, venture growth, buyout, special situations, distressed assets, credit & venture debt among others. For more information visit https://www.ivca.in/

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