Traditional sectors led by healthcare and advanced manufacturing made up nearly 75% of private equity (PE) and venture capital (VC) deals in India in 2023, with a strong growth outlook for 2024, according to India Private Equity Report 2024 by and investment industry body, IVCA.
The overall PE-VC deal-making activity dropped by nearly 35% in calendar year 2023 at pre-COVID-19 levels, down to $39 billion year-on-year (YoY). This was largely driven by a 60% reduction in VC investments, per the report. In contrast, PE investments declined by a moderate 20% in India with multiple large-scale deals of $500 million-plus in high-quality assets.
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The report predicted that traditional businesses will continue to attract outsized investments for 2024, maintained the report, including for infrastructure and renewable energy, and will benefit from moves to diversify the global supply chain for sectors like electronics, pharma and chemicals, which will likely benefit Indian manufacturers.
Among the traditional sectors, IT and ITeS deals continued to taper, declining by nearly 65% due to elevated valuation and subdued demands. SaaS and new-age tech including consumer tech and fintech deals fell by nearly 60% YoY in 2023 as investors focused on profitability.
“The reduction in SaaS deals is due to large scale and well-funded companies staying out of the public markets, as they continue to grow into the valuations they have raised private capital at. In the case of new age consumer tech companies, the operating economics are still being proven for some of the businesses,” Gustaf Ericson, Associate Partner at Bain & Company, told YourStory.
He added that investors will continue to exercise caution when it comes to new-age tech deals in 2024.
However, the PE-VC exit values increased by nearly 15% YoY at $29 billion in 2023. Exit volumes increased from approximately 210 exits in 2022 to 340 in 2023.
“Public markets have been strong in India. The great insight is that a lot of the public exits have been in domestic markets, driven by block trades more than IPOs. However we see IPOs opening as well,” added Ericson.
The report also said that participation of domestic funds in Indian investments increased by nearly 2.5X in 2023 compared with 2019. The year also saw global funds increasing their India allocation while leading domestic PE funds are likely to close large funds in 2024, continuing the momentum.
Edited by Kanishk Singh
