How Indian companies continue to attract equity investors

Indian Private Equity/Venture Capital (PE/VC) investments are off to a good start in January 2022 as the month reported a 180 % increase in investment flow. The record setting $77.1 billion invested by PE/VC funds in 2021 underscores the India investment appetite of alternative asset managers.

IVCA-EY monthly PE/VC roundup showed PE/VC investors pumped around $4.5 billion in Indian companies. This increase has been primarily driven by VC/start-up investments that surged to $3 billion, representing 68% of the total monthly PC/VC investment received (Jan 2021 -S$700 million; Dec 2021 - $3.2 billion). January 2022 also recorded 13 large deals (deals of value greater than $100 million) aggregating $2.9 billion compared to three large deals worth $680 million in January 2021.

Vivek Soni, Partner and National Leader Private Equity Services, EY said the record setting $77.1 billion invested by PE/VC funds in 2021 underscores the India investment appetite of alternative asset managers. 

Playing its part, in the Union Budget 2022, the GoI has announced the setting up of an expert panel to examine "appropriate measures " for scaling up PE/VC investments. With this and other measures (see section on Union Budget 2022), we expect the GoI to actively work towards further smoothening the process of fund deployment and exits by the alternative investment industry across asset classes. 

While we remain sanguine about the Indian PE/VC sector in the medium to long term, downside risks like rising global inflation, rising crude oil prices, interest rate tightening by the US Fed and impending elections in five key states in India remain key sensitivity factors to consider in the short-term,” he said.

PE/VC investments in January 2022 recorded US$4.5 billion, 2.8 times the value recorded in January 2021(US$1.6 billion) and at par with investments in December 2021(US$4.4 billion). January 2022 recorded 117 deals, 43% higher than January 2021 (82 deals) and 15% higher than December 2021(102 deals). 95% of the total PE/VC investments in January 2022 were pure play investments (excluding real estate and infrastructure sectors) compared to 84% in January 2021 and December 2021.

Snap shot

January 2022 recorded 13 large deals (deals of value greater than US$100 million) aggregating $2.9 billion compared to three large deals worth $680 million in January 2021 and 12 deals worth $2.8 billion in December 2021. The largest deal in January 2022 saw Alpha Wave, Prosus Ventures, QIA, and others invest $700 million in Swiggy.

By deal type, start-up investments were the highest in terms of value in January 2022 at $3.1 billion across 85 deals ($700 million in January 2021 across 57 deals) and accounted for 68% of all PE/VC investments. Growth investments were the second highest with US$689 million invested across 16 deals ($632 million across 14 deals in January 2021). Buyouts were the lowest in January 2022 at $133 million across two deals (one deal worth $150 million in January 2021). 

PIPE investments recorded $320 million across four deals (one deal worth $12 million in January 2021). Credit investments recorded $300 million across 10 deals ($121 million across nine deals in January 2021).

Sector break-up

From a sector point of view, e-commerce was the top sector in January 2022 with $1.7 billion in PE/VC investments across 20 deals ($689 million across 15 deals in January 2021). 

The second largest sector was technology with $652 million recorded across 18 deals ($49 million across nine deals in January 2021) followed by financial services sector that recorded $390 million across 20 deals ($146 million across 15 deals). 

ends

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