India has been experiencing a notable downturn in Private Equity – Venture Capital (PE-VC) investments in the last couple of years. According to a recent report by Venture Intelligence, the value of PE-VC investments in Indian companies plunged 37.7% YoY to less than $30 billion in 2023. At the same time, the number of deals dropped by 80.2% YoY. These PE VC firms invested $29.66 billion in Indian companies across 756 deals in 2023, a stark contrast to the $47.63 billion spread across 1,362 deals the previous year in 2022.
It’s noteworthy that 2021 marked a pinnacle for India’s investment landscape. Both private equity and venture capital investments in Indian companies have reached an all-time high, breaking all previous years’ records. In that year, PE-VC firms invested a record $65.48 billion into Indian enterprises, spanning 1,456 deals. This was a whopping 69.4% YoY increase in investment value and a 51.5% YoY increase in deal volume.
However, venture capital inflows into Indian companies have notably dwindled in 2022. During the year, the PE VC investments declined 27.3% YoY in value and 6.5% YoY in deal volume. This shift was primarily attributed to a loss of investor confidence in various companies opting for restructuring measures. These measures included substantial workforce reductions, the shutdown of business segments due to pandemic-induced losses, and a strategic focus on expense reduction as companies positioned themselves for profitability ahead of impending IPOs, among other factors.
Note: The provided investment figures exclude Private Equity investments in Real Estate.
Major Highlights: PE VC Investments in India 2023
- In 2023, there were 67 mega deals, each exceeding $100 million, amounting to a total of $21.2 billion. This was a significant drop from 112 similar investments worth $31.8 billion in 2022.
- In 2023, the largest Private Equity investment was the $2.4 billion infusion into Manipal Hospitals by Temasek and TPG Capital, granting them majority control. This was followed by the $1.35 billion acquisition of HDFC Credila, specializing in education loans, by Baring Asia and ChrysCapital, and a $1 billion investment in Reliance Retail by the Qatar Investment Authority (QIA).
- The top five industries that received the most PE VC funding in 2023 were IT & ITES, Healthcare & Life Sciences, Energy, BFSI, and Manufacturing.
- In 2023, the IT & ITeS companies received $8.1 billion in PE-VC investments, a massive 61% YoY decline from 2022’s $20.7 billion. Quest Global and Lenskart led the investments, each securing $500 million from the Carlyle Group and ADIA (Abu Dhabi Investment Authority), respectively.
- Indian companies in the Healthcare & Life Sciences sector secured $5.5 billion in PE VC investments during 2023, a 1.3x increase from the $4.2 billion raised in 2022.
- Companies in the Energy sector received $4.5 billion worth of investments in 2023, a 15.5% YoY increase from $3.9 billion in 2022.
In 2023, the number of new “Unicorn” startups dropped to just two, a significant decrease from 21 in 2022 and the record 44 in 2021. Zepto, a quick commerce startup, secured $231 million from foreign investors in August 2023. Meanwhile, Incred Finance, focusing on consumer and small business loans, attracted $60 million from domestic Family Offices and HNIs to earn its Unicorn status in November 2023.
The notable decline in PE VC investment amount and deal volume in Indian companies, coupled with the dwindling number of new unicorns, raises concerns among entrepreneurs and investors. To revive investor confidence, established companies and emerging startups must prove their resilience, address concerns around governance and profitability, and adapt to the evolving economic realities.
