The private equity industry has faced challenges, including inflationary pressures, concerns of economic recession, and uncertainty brought on by geopolitical factors, impacting investments, exits, and fund-raising globally in 2022.
Despite this, 2022 resembled the Tale of Two Halves: first six months continuing the record-breaking post-COVID rally in deal making, exits and fundraising while everything came to a halt in the latter half of the year amid central bank’s move to raise interest rates to rein in persistent and record-high inflation across the globe.
Despite this, 2022 remains the second-best year for Indian PE/VC investments till date with investments of approximately USD 41 billion across 1,350 deals, revealed a recent report by 1Lattice (Prev. PGA Labs).
PE/VC deal value and volume declined by 44 per cent marking an end to a 10 year bull run that has endured since 2012 (with a brief decline in 2016).
Funding frenzy towards consumer apps and e- commerce platforms tempered in 2022 with SaaS/AI and BFSI increasingly receiving investor interest. Investors remain bullish on the India growth story with global LP allocations to India expected to increase in 2023 and beyond.
“We believe that healthcare, SaaS, Climate tech, and BFSI are expected to become more attractive this year with the PE/VC backed companies driving the next phase of the India growth story,” said the report.
India-dedicated PE / VC funds raised record-setting USD 17.4 billion in 2022, compared to USD 7.7 billion in 2021. International funds invested out of global, Asia or non- geography specific funds are now building dedicated teams to invest across the Indian landscape. Domestic funds are increasing their fund size to compete with global funds.
Family funds have become more significant in the early stage investing while Corporate VCs are expanding their deal share in growth stage deals. Indian Corporate VCs’ risk appetite for investing were lower than the broader global CVC market in the second half of 2022, highlighted the report.
PE/VC funds have played a crucial role in GDP growth by providing capital to Indian companies for fueling growth. PE/VC funds invested USD 41.3 billion in 2022 across 1,358 deals, while the average deal size reduced by more than 50 per cent compared to 2021.
PE/VC funding of USD 600 billion is needed to create a USD 5 trillion Indian economy. PE/VC funding was USD 210 billion in the last 5 years and contributed to approximately 9 per cent of the total funding received. PE/VC funding is expected to be USD 600 billion in the next 5 years and expected to contribute approximately 13 per cent of the total funding required, the report further added.
PE/VC investments in India are expected to reach USD 150-170 billion by 2027. India continues to attract investors — about 189 new PE/VC investors in 2022. It further recorded a 27 per cent increase in new international investors in 2022 with the government’s actions supporting growth momentum. India witnessed a highest ever yoy increase (~125%) in PE/VC fundraising in 2022.
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