PE/VC Investments Up 60% In September: EY

MUMBAI: Private equity and venture capital (PE/VC) investments rose 60% on a YoY basis in Q32023 and touched $13.6 billion, said consulting and audit firm EY India in its latest PE newsletter.

However, they were 5% lower than 2Q2023. The number of deals in 3Q2023 was lower by 18 % on YoY basis, it said .

A pickup in pure-pay PE/VC investments of ~88% bolstered the growth in total PE/VC investments in Q32023, which recorded 31 large deals aggregating $10.7 billion compared to 15 large deals worth $4.8 billion in 3Q2022, it said.

Growth investments were the highest in 3Q2023 at $4.5 billion followed by buyouts at $3.5 billion. From a sector point of view, infrastructure was the top sector in 3Q2023 recording $3.9 billion on the back of investments in the renewable energy sector, it said.

PE/VC exits were at $8.6 billion across 85 deals in Q32023, the highest in seven quarters. Open market exits accounted for 44% of all exits by value.

In 2023, investments in the life sciences sector are at an all-time high, driven largely by an increasing number of buyouts in the healthcare sector.

“Strong returns generated by PE funds in recent exits are adding to the attractiveness of the sector for PE/VC funds that are already investing heavily due to the underlying secular tailwinds,” it said.

” Looking at the strong deal pipeline, notwithstanding the increasingly uncertain global macro, we remain hopeful that Indian PE/VC investments in 2023 will surpass 2022 levels” Vivek Soni, partner and national leader of private equity services at EY India.

PE fund managers also say that investments are on the rise. “Since late last year, we are seeing a strong sequential improvement in PE/VC investments in India. From a five year perspective, there has been an definite improvement in PE/VC investments in India,” said Ankit Aggarwal, director-Kotak Private Equity at Kotak Alternate Asset Managers.

Aggarwal said the increase in PE deployment is due to the Indian government’s focus to create a growth-oriented mind set and consistent regulatory and policy environment.

Given the record amount of capital that has been raised by India-focused funds, there is substantial capital waiting to be deployed, Aggarwal said. He said that at the end of 2021, total PE/VC dry powder was $11.1 billion and in 2022, further $13.7 billion was raised by funds.

Renuka Ramanathan, managing director and CEO at Multiples Asset Management said that confidence in the Indian alternate investment space is the highest she has seen in the last two decades, not only by global institutional investors but more importantly by domestic investors including institutional investors as well as UHNIs and family offices.” India is set to witness a huge flow of alternate capital for building AtmaNirbhar Bharat led by atma vishwas (self confidence) of business builders and investors”, she said.

She said that in the current context, the country is experiencing three significant structural shifts that are shaping the industry. “We are creating valuable companies, that can address global opportunities, through digital prowess and innovations; Second, consolidation of Indian corporates to become mega corporates thereby becoming globally competitive,” she added .

Thirdly, capital restructuring by strong profitable companies, taking advantage of the availability of equity through alternative assets in bringing transformative changes and building sustainable future-proof companies.

Akhil Awasthi, managing partner, Tata Capital Growth Fund said that their  sources suggest that the deals in the July-September  quarter of 2023 are much higher than what the Refinitiv figure suggested.

PE investments in the September quarter of 2023 was around $ 8.3 billion compared to $5.2 billion in the same period a year back. Even after taking out the big-ticket deals in Reliance Retail, the GIC investment of $ 1.5 billion in Genus Power, it would be around the $ 5.2-5.3 billion mark in Q3CY 2023 (similar amount to the Q3CY 2022), he said.

Going forward, he sees PE deals gaining momentum in the next three months of 2023 and 2024. “On the macro side India is an attractive investment destination given its potential growth, macroeconomic and policy stability. At a micro level there are still good companies and entrepreneurs who prefer to raise capital from PE  to scale up businesses with an aim to IPO the company,” he said.

However, investors may turn cautious if the existing geo-political tension in West Asia flares up resulting in spike in crude prices which can have an adverse impact on the US dollar Indian rupee exchange rates , he said .

Pranav Parikh, Managing partner & Head PE, Nuvama Asset Management expects that the space would continue to see activity build up over the next few quarters. “Business activity and capex cycles are seeing very high momentum on basis of various macro tail winds.There is significant dry powder available for deployment in any case,” Parikh said .

He said that there is also heightened interest in large M&A deals where funds are partnering with corporates and that is a clear sign of maturity of the PE ecosystem in this country. “This will lead to large deals in the market,” he said.

Source: The Financial Express

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