PE/VC investments see 60% YoY jump to $13.6 bn in Jul-Sep quarter

New Delhi, Private equity (PE) and venture capital (VC) investments registered a 60 per cent year-on-year growth in the July-September quarter to touch USD 13.6 billion, according to the latest EY-IVCA monthly PE/VC roundup. According to the report, the third quarter of this year recorded an investment worth USD 13.6 billion across 209 deals, 60 per cent higher than the investments in the third quarter (3Q) of 2022.

On a sequential basis, however, deal value was 5 per cent lower than the April-June quarter, the report said, adding that the number of deals in the July-September quarter was lower by 18 per cent on a year-on-year basis.

"A pickup in pure-pay PE/VC investments of around 88 per cent bolstered the growth in total PE/VC investments in 3Q2023, which recorded 31 large deals aggregating USD 10.7 billion compared to 15 large deals worth USD 4.8 billion in 3Q2022," Vivek Soni, Partner and National Leader, Private Equity Services at EY India, said.

According to the report, since 2018, the life sciences sector has attracted a significant sum of USD 22.1 billion in PE/VC investments, almost equally divided between pharmaceutical and healthcare.

The early years primarily saw growth driven by pharmaceutical investments. However, post-pandemic, healthcare investments have taken the lead, it said.

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

"The Indian macro, while showing strong signals in terms of new highs in Index of Industrial production, GST collections, advance tax collections and heightened consumer confidence as we get into the festive season, is increasingly being counter-weighted by a deteriorating global macro, driven largely by recessionary fears in the US and Europe," Soni said.

Any sustained spike in crude oil prices will have a detrimental impact on inflation around the world in general and the Indian economy in particular. All these downside risks need to be evaluated as the Indian PE/VC sector continues its fragile recovery, he added.

The startup sector continues to struggle, with year-to-date investments in startups at a seven-year low. While there is a funding winter for primary investments in startups, it is not indicative of inactivity on the part of PE/VC funds, as secondary deals are at an all-time high of USD 5.2 billion.

Likewise, PIPE investments in 2023 are at an all-time high of USD 7.5 billion. The buoyant equity markets have allowed a revival in the PE-backed IPO market which is adding to the improving investment sentiment.

"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," he noted.

Exits were recorded at USD 8.6 billion across 85 deals in 3Q2023. The growth in exits was across all deal segments, with IPOs recording the highest growth year-on-year, followed by secondary and strategic exits.