PE/VC investments in April 2023 record an 18-month high

• April 2023 recorded US$7.4 billion in PE/VC investments
• Pure play PE/VC investments in April 2023 recorded a 22% y-o-y decline in terms of value and 55% decline in terms of volume
• Infrastructure was the top sector in April 2023 with PE/VC investments of US$3 billion
• Secondary exits recorded US$1.4 billion, 86% of total value of exits

Mumbai, 16 May 2023: According to the IVCA-EY monthly PE/VC roundup, April recorded investments worth US$7.4 billion across 61 deals, including 12 large deals worth US$6.7 billion. Exits were recorded at US$1.5 billion across 15 deals in April 2023.

Vivek Soni, Partner and National Leader, Private Equity Services, EY said, “April 2023 recorded US$7.4 billion in PE/VC investments, 1% higher than the investments in April 2022 and 37% higher than March 2023. PE/VC investments in April 2023 have recorded an 18-month high on the back of a couple of large US$1 billion+ deals in healthcare and renewables sectors.

By deal type, growth investments were the highest in terms of value in April 2023 at US$4.5 billion across 12 deals compared to US$4.9 billion invested across 23 deals in April 2022. From a sector point of view, infrastructure was the top sector in April 2023, driven by large investments in the renewable energy space.

Pureplay PE/VC investments declined by 22% in terms of value and 55% in terms of volume on a y-o-y basis. In line with our projections on attractiveness of real assets investments, the infrastructure and real estate asset class recorded an 82% increase y-o-y in PE/VC investments and the deal pipeline remains robust.

In April 2023, PE/VC exits recorded a de-growth on a y-o-y and sequential basis of 45% and 24%, respectively. Exits via secondary sale were the highest in April on account of the large US$1 billion exit from Manipal Hospitals by TPG and NIIF.

While a few large deals helped prop up PE/VC investments in April 2023, the deal momentum continues to remain tepid with the number of deals continuing its declining trend. With Central Banks not relenting on interest rate tightening, the pressure on startup and growth investments in TMT and e-commerce sectors is expected to continue. In the technology sector, the slowdown in PE/VC funding, which was initially limited to large buyouts and later stage deals has now extended to even the startup and early-stage segments. While the front-line capital market indices have shown signs of     recovery in anticipation of a FED pivot, the private markets remain circumspect. The bid-ask spread between investors and sellers remains high and convergence on valuation multiples has not happened. This has resulted in deal evaluation periods getting extended and barring sectors like healthcare and financial services, deal flow is sluggish. We expect infrastructure and real estate sectors along with healthcare and financial services to continue being the bright spots for PE/VC investment activity in the short term.”

Investments

PE/VC investments in April 2023 recorded US$7.4 billion, 1% higher than PE/VC investments in April 2022 (US$7.3 billion) but 37% higher than March 2023. PE/VC investments in April 2023 were highest in the past 18 months. In terms of number of deals, April 2023 recorded a 55% y-o-y decline and a 32% sequential decline. Pureplay PE/VC investments at US$4.4 billion across 49 deals, declined by 22% in terms of value and 55% in terms of volume on a y-o-y basis. In contrast, the infrastructure and real estate asset class recorded US$3 billion in PE/VC investments, an 82% increase y-o-y and a 3% increase over March 2023.

April 2023 recorded 12 large deals (deals of value greater than US$100 million) aggregating US$6.7 billion, a 19% increase y-o-y. The largest deal in April 2023 saw Temasek acquire an additional 41% stake in Manipal Hospitals for US$2 billion, making it the largest shareholder in the Hospital chain. It was also the largest deal in the healthcare sector.

By deal type, growth investments were the highest in terms of value in April 2023 at US$4.5 billion across 12 deals compared to US$4.9 billion invested across 23 deals in April 2022, a 9% decline y-o-y in value terms. PIPE investments were second highest, recording US$1.2 billion across four deals in April 2023 compared to US$209 million recorded across five deals in April 2022, a six-fold increase y-o-y in terms of value. Startup investments recorded US$676 million across 36 deals compared to US$1.8 billion recorded across 86 deals in April 2022. Buyouts recorded four deals worth US$783 million compared to US$170 million across two deals in April 2022.

From a sector point of view, infrastructure was the top sector in April 2023, driven by large deals in the renewables space recording US$3 billion in PE/VC investments across 10 deals (eight deals worth US$927 million in April 2022). Healthcare was the second largest sector on the back of a single large deal, with US$2.6 billion recorded across six deals (seven deals worth US$142 million in April 2022). Sectors including technology, e-commerce, financial services, and media and entertainment were the worst performers, each recording over 50% decline in value of PE/VC investments.

Spotlight: Technology sector PE/VC investment trend

Fears of a recession, stoked by rising interest rates in developed markets, have hit the revenues, sales, and growth prospects of many global tech firms. A major share of Indian tech firms’ earnings comes from global clients. As a result, most Indian tech firms are following global tech trends in terms of earnings downgrades and derating of valuation multiples.

Though in the listed space the IT index is down by almost 30% from the post COVID peak, the moderation in private markets valuation multiples is less acute than public markets.

While buyouts had recorded almost a 90% y-o-y decline in PE/VC investments in 2022, growth and startup investments grew over the same period¹.

Though last year the impact on the PE/VC deal activity in the technology sector[2] in India was primarily limited to the large deal segment with no mega buyouts and secondary trades between PE funds materializing, the slowdown in deal activity seems to have gotten worse in 2023, extending into the early-stage and startup space as well. The startup segment in the technology sector in India has seen an over 80% decline in value of PE/VC investments in the first four months of 2023 (US$250m vs. US$800m in 2022).

Not only have the deal sizes declined, deal count too has fallen sharply in 2023, recording a 55% y-o-y decline in the number of deals in the Jan-Apr period.

PE/VC investments in the India based SaaS startups was not as significantly impacted in 2022 when compared to the other segments. However, lengthening sales cycles and continuing cost reduction by enterprise customers has started posing challenges of falling revenue for Indian SaaS startups. This has impacted the funding momentum in 2023 and may impact fund raising plans of many of the high-flying SaaS startups.

Exits

April 2023 recorded 15 exits worth US$1.6 billion compared to US$2.9 billion recorded in April 2022 across 27 deals and US$2.1 billion recorded across 34 deals in March 2023.

Secondary exits were the highest at US$1.4 billion across five deals, accounting for 86% of total value of exits on the back of a single large deal that saw TPG and NIIF exit their stakes in Manipal Hospitals for US$1 billion, which was also the largest exit in April 2023.

Fundraise

April 2023 recorded total fundraises of US$193 million, compared to US$1.5 billion raised in April 2022. The largest fundraise in April 2023 was by Iron Pillar that raised US$129 million for investments in global cloud-based SaaS platforms.

Notes to Editors

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About IVCA

The Indian Private Equity & Venture Capital Association (IVCA), is the apex body promoting the Alternative Investment Funds (AIFs) in India and promotes stable, long-term capital flow (Private Equity (PE), Venture Capital (VC) and Angel Capital) in India.

With leading VC/ PE firms, institutional investors, banks, corporate advisers, accountants, lawyers and other service providers as members, it serves as a powerful platform for all stakeholders to interact with each other. Being the face of the Industry, it helps establish high standards of governance, ethics, business conduct and professional competence. With a prime motive to support the ecosystem, it facilitates contact with policy makers, research institutions, universities, trade associations and other relevant organizations. Thus, support entrepreneurial activity, innovation and job creation.