Press release

2022 Indian PE-VC investments surpass $60 billion for the third consecutive year amid global headwinds

2022 Indian PE-VC investments surpass $60 billion for the third consecutive year amid global headwinds

India's traditional sectors emerged as an attractive investment destination, with sectors like BFSI, Healthcare, and Energy dominating and ESG becoming centre-stage

  • aprile 19, 2023
  • Tempo di lettura min.

Press release

2022 Indian PE-VC investments surpass $60 billion for the third consecutive year amid global headwinds

NEW DELHI – April 19, 2023 India’s share of private equity and venture capital (PE-VC) investments in Asia-Pacific grew from ~15% to ~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. India saw investments of $61.6 billion in a difficult year for private equity globally—in a slight moderation of 12% over 2021’s peak value of $69.8 billion. With more than 2,000 deals, the strong deal flow from previous years continued. Traditional sectors led by BFSI, healthcare, energy and manufacturing demonstrated resilience and grew by 50% to ~$28 billion enabled by strong domestic consumer sentiment. ESG emerged as a breakout theme in 2022, with investments in clean energy and EV accelerating, to reach nearly $7.9 billion. 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. These are among the findings from Bain & Company’s India Private Equity Report 2023, released today in collaboration with the Indian Venture and Alternate Capital Association (IVCA).

"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”, said 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.”  

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 amidst mounting geopolitical tensions and cascading macroeconomic challenges. 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. 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.” said 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. 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. Consumer tech and information technology (IT) sectors, which drove around 60% of deal value in 2021, contracted to nearly 30% in 2022. These sectors slowed through the year amidst testing times for new-age business models and challenges in export demand for the IT sectors, in an uncertain global environment. Exits declined in 2022 to $24 billion from an all-time high of $36 billion in 2021. Traditional sectors dominated exits as well, with share of exits greater than $100 million expanding to 75%.

Sectors deep dive: Banking sees robust deal activity and healthcare sees strong exit momentum

India’s BFSI and fintech sectors have seen a resurgence in interest, with deals worth almost $10 billion in 2022, accounting for 18% of the country’s PE-VC investments. Lending is a key theme driving investments across NBFCs and fintechs with growth under-pinned by a large untapped credit population, increasing consumption by a growing middle class, and openness to credit including for discretionary expenses. Players are increasingly innovating through both offline models developing low-cost structures that tap into relatively rural areas (historically under-served by banks) and digital models (utilizing alternate data to drive underwriting and quicker disbursements).

Post pandemic, India’s healthcare sector has emerged as an attractive bet for investors. With deals worth $4.3 billion in 2022, at approximately 8% of total PE-VC investments, the sector dominated exits, commanding 16% of total exit value. KKR’s public markets exit from Max Healthcare worth $1.6 billion, Everstone's exit from Sahyadri Hospitals and the IPOs of Medanta and Rainbow Hospitals were a few notable exits in the space. As investors look for stability in turbulent times, the resilience of healthcare providers, pharma, diagnostics, and single-specialty providers is enabling the sector to continue gaining share.  

ESG: Moving from mind-share to wallet-share

The ESG and climate agenda also came into sharper focus in 2022, with investors accelerating their ESG journeys from ‘mind-share’ towards ‘wallet-share’, as energy transition received a boost with multiple large clean energy deals undertaken by investors. Investments in ESG assets more than doubled, from around 5% over the last few years to 13% of India’s overall PE-VC investments to 2022, witnessing nearly $7.9 billion in deal value.

These investments have been largely focused on clean energy and electric mobility accounting for approximately 90% of $19.2 billion invested in ESG between 2018 and 2022. Clean energy, especially solar, saw strong deal activity in 2022 with investments of $5 billion, supported by increasing cost competitiveness of solar against thermal energy, regulatory tailwinds for renewables and an acceleration in the climate agenda.

The Investor perspective

Dry powder was robust in 2022, on the back of record fundraising driven by buoyant private equity sentiment of 2021. Even with an expansion in fund sizes, India has increased its share of the Asia franchise for leading global funds. Leading Indian general partners (GPs) crossed the $1 billion fund size mark for a first time. Despite an abundance of dry powder, the changing sentiment through the year has driven investors to consolidate focus on fewer, higher-quality assets and drive value creation with a spotlight on profitability, within their portfolios.

Rajat Tandon, President, IVCA, shares, “2022 witnessed steady growth in healthcare, energy, financial services, banking and insurance which is a testament to India still being a bright spot in the APAC region. Private Equity players remain positive in the long term as business fundamentals continue to evolve with improved unit economics in these core sectors and investors back higher-quality assets within their portfolios with a dedicated push towards profitability.”

Limited partners (LPs) and sovereign wealth funds (SWFs) also demonstrated an increase in commitment to India and showed a noticeable shift from a co-investment approach towards solo deals. Many large SWFs and LPs participated in solo deals, valued at $6B in 2022 with volumes tripling since 2020. Sector diversification was another key theme, with many investors making their marquee initial investments in select traditional sectors in 2022.

Post the storm, a tempered outlook for 2023

Private Equity in India has seen remarkable growth, especially in the last decade, from an investor base of 200 to more than 800 active investors, as well as an expansion in exit opportunities. Even as funds adopt a cautious approach entering 2023, the Indian opportunity continues to be attractive. In the near term, a shift in deal flow is anticipated, with a drawdown in the number of mega ($1B+) deals, and an increased focus on profitability for portfolio companies as funds focus inward. Megadeal activity, including buyouts, will stay muted for a large part of 2023. Traditional sectors and ESG themed investments will continue to ride on robust consumer sentiment, while structured deals could see pace in consumer tech. The short-term downturn notwithstanding, India sees continuing interest from investors, especially from SWFs and LPs looking to deploy funds.

Editor's Note: For more information or interview requests please contact Sitara Achreja/Pavitra Mattoo at or +91 98103 67013/+91 98218 30379

About Indian Venture and Alternate Capital Association

Established, for over a decade, by industry professionals with a unified aim to drive forward alternate capital industry in India. The IVCA (Indian Venture and Alternate Capital Association) is India’s apex body representing the interests of PE/VC industry, real estate, infrastructure and credit funds, limited partners, family offices, and VCs. IVCA is a nonprofit organisation powered by its members. The members are firms from around the world, including investment managers, investment advisors, general partners, funds whose sponsors are sovereign wealth funds, pension funds, national governments, large government entities, bilateral/multilateral financial institutions, high-net-worth individuals, and family offices.

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