Private equity (PE) and venture capital (VC) investments in India experienced a significant 60% year-on-year growth in the July-September quarter, reaching a total of USD 13.6 billion. This data comes from the latest EY-IVCA monthly PE/VC roundup. The report reveals that the third quarter of 2023 witnessed investments worth USD 13.6 billion across 209 deals, marking a notable increase compared to the same quarter in 2022.
Although deal value in the July-September quarter was 5% lower than the preceding April-June quarter, the number of deals dropped by 18% on a year-on-year basis.
Vivek Soni, Partner and National Leader of Private Equity Services at EY India, attributes the growth in total PE/VC investments to a significant increase of around 88% in pure-pay PE/VC investments during the third quarter of 2023. This period saw 31 large deals amounting to USD 10.7 billion, a significant surge compared to the 15 large deals worth USD 4.8 billion in the third quarter of 2022.
The report also highlights the life sciences sector as a major recipient of PE/VC investments since 2018, attracting a total of USD 22.1 billion. Investments in this sector are equally divided between pharmaceuticals and healthcare. While pharmaceutical investments primarily fueled growth in the early years, healthcare investments have taken the lead after the pandemic.
In terms of investment types, growth investments reached USD 4.5 billion in the third quarter of 2023, making it the highest category, followed by buyouts at USD 3.5 billion. Infrastructure emerged as the top sector in the same period, with investments reaching USD 3.9 billion, primarily driven by investments in the renewable energy sector.
However, Soni cautions that the Indian PE/VC sector’s fragile recovery may be impacted by global macroeconomic concerns, such as recessionary fears in the US and Europe. He also highlights the potential negative impact of sustained increases in crude oil prices on global inflation, particularly for the Indian economy.
Meanwhile, the startup sector in India is facing challenges, with investments in startups reaching a seven-year low. This funding winter for primary investments in startups does not imply inactivity from PE/VC funds, as secondary deals have reached an all-time high of USD 5.2 billion. Additionally, PIPE (Private Investment in Public Equity) investments in 2023 have also hit an all-time high of USD 7.5 billion. The buoyant equity markets have contributed to a revival in the PE-backed IPO market, further improving investment sentiment.
Despite the uncertain global macroeconomic environment, Soni remains optimistic due to a strong deal pipeline. He expresses hope that PE/VC investments in India in 2023 will surpass the levels achieved in 2022.
The report also discusses exits, which reached USD 8.6 billion across 85 deals in the third quarter of 2023. Exits showed growth across all deal segments, with IPOs recording the highest year-on-year growth, followed by secondary and strategic exits.
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