PE/VC investments reports 2.3x growth in Feb

 Fintech investments have grown at a CAGR of 125% since 2016

PE/VC investments in the month of February recorded investments worth $5.8 billion across 117 deals, including 17 large deals worth $4.4 billion. VC/start-up investments were the highest in terms of value in February 2022 at $2.5 billion across 85 deals, according to IVCA-EY monthly PE/VC roundup.


in $ mn
Source: IVCA-EY report  

PE/VC investments in February 2022 were ~US$5.8 billion, 2.3 times the value recorded in February 2021 (US$2.5 billion) and 24% higher than investments in January 2022 (US$4.6 billion). February 2022 recorded 117 deals, 33% higher than February 2021 (88 deals) and 4% lower than January 2022(122 deals). 88% of the total PE/VC investments in February 2022 were pure-play investments (excluding real estate and infrastructure sectors) compared to 79% in February 2022, showed IVCA-EY data.

February 2022 recorded 17 large deals (deals of value greater than or equal to US$100 million) aggregating US$4.4 billion, compared to ten large deals worth US$1.6 billion in February 2021 and 14 deals worth US$3 billion in January 2022. The largest deal in February 2022 saw Baring PE Asia buyout IGT Solutions Private Limited from AION for over US$800 million.

By deal type, start-up investments continued to receive maximum PE/VC investments in February 2022 at US$2.5 billion across 85 deals (US$1.1 billion in February 2021 across 61 deals) and accounted for 44% of all PE/VC investments. Growth investments were the second highest with US$1.5 billion invested across 15 deals (US$1.1 billion across 14 deals in February 2021). Buyouts have recorded a strong surge in February 2022, recording US$1.5 billion across seven deals (two deals worth US$177 million in February 2021). PIPE investments recorded US$82 million across four deals (six deals worth US$113 million in February 2021). Credit investments recorded US$148 million across six deals (US$37 million across five deals in February 2021).

From a sector point of view, technology was the top sector in February 2022 with US$1.5 billion in PE/VC investments across 19 deals (US$48 million across four deals in February 2021), propped up by the large IGT Solutions buyout by Baring PE Asia. The second largest sector was financial services with US$1.2 billion recorded across 26 deals (US$245 million across 13 deals in February 2021), driven by investments in fintech which saw four large deals of US$100 million+ with the crypto platform Polygon receiving the largest investment of US$450 million. 

The Logistics sector that saw US$723 million invested across six deals was the third largest, with major investments in the logitech space which is an emerging area for PE/VC investments.

PE/VC investment trend in fintech

PE/VC investments in fintech have been a rising trend over the past 5-6 years. Fintech investments have grown at a CAGR of 125% since 2016. The recent surge of PE/VC investments in 2021 and the first two months of 2022 - US$9.2 billion – is more than the total investments in the sector in the previous five years (2016-2020) combined. As a result, within the financial services sector, the share of PE/VC investments in fintech has increased from 5% in 2016 to 66% in 2021 and as high as 90% in the first two months of 2022.

According to the report, the pandemic was one of the major drivers of fintech adoption and the consequent surge in investments in the fintech segment. Post the onset of the pandemic, PE/VC investments in fintech have exceeded investments in the core segments of lending, insurance etc., in the financial services sector.

Payments, insurance and lending segments have been the largest in terms of PE/VC investment value in the fintech sector with the payments space receiving 48% of all PE/VC fintech investments since 2016.

While the payments segment continues to be the largest one within the fintech sector and amongst the fastest growing, the highest growth was recorded by neo-banking and DeFi segments that recorded 20x growth in 2021-2022 compared to total investments received by these segments between 2016-2019. Online insurance, which was one of the earliest segments to receive PE/VC funding within the fintech sector was the only segment that recorded a decline in PE/VC investments, probably because of the declining moat and intensifying competition in the online insurance space.

While the fintech segment has recorded some large deals in recent years, more than 50% of the deals were lower than US$20 million in ticket size.

Vivek Soni, Partner and National Leader Private Equity Services, EY said, pure-play PE/VC investments (excluding infrastructure and real estate sectors) and start-up investments continued to dominate the investment landscape in February 2022, accounting for 88% and 44% of PE/VC investment value respectively.

PE/VC exits in February 2022 recorded US1.4 billion across ten deals, primarily driven by secondary deals which includes the US$800 million exit from IGT Solutions by AION. As the volatility in the mid-cap and small-cap indices continued in February 2022, there was only one PE-backed IPO and we expect the number of PE-backed IPOs to be lower in 2022 given the volatility in the capital markets, rise in uncertainty and waning investor interest in the primary markets.

While the technology sector continued to receive maximum PE/VC investments in 2022, there has been a significant surge in investments in the fintech segment of the financial services sector that saw large deals in the emerging Decentralised Finance (DeFi) space. Fintech investments have grown at a CAGR of 125% over the past five years, primarily driven by investments in the payments ecosystem with new segments like DeFi and neo-banking being the fastest growing, recording 20x growth in investments. More details on this are available in the spotlight section of this report.

India’s position as an attractive destination for PE/VC investments is expected to remain strong in 2022 given its high growth, macroeconomic and policy stability. The recent state election results should underwrite more certainty around continuity of government reforms. With diplomatic talks resuming, there is hope emerging on the possibility of an early end to the geo-political conflict. However, uncertainty remains high and faster than anticipated interest rate tightening by the Fed, rising inflation and commodity prices amidst geo-political tensions, alongside a resurgence in COVID infections continue to remain potential risks to watch out for,” he said.

ends

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