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According to the IVCA-EY monthly PE/VC roundup, November 2022 recorded investments worth US$4 billion across 88 deals, including seven large deals worth US$2.8 billion. Exits were recorded at US$1.8 billion across 29 deals in November 2022, including six PE-backed IPOs.

Vivek Soni, Partner and National Leader, Private Equity Services, EY said, "November 2022 recorded US$4 billion in PE/VC investments, 42% lower than the investments in November 2021 but 18% higher than October 2022. After being on a downtrend over the past two quarters, PE/VC investments have increased sequentially over the past two months, both in terms of value and volume.

By deal type, buyouts were the highest in terms of value in November 2022 at US$1.8 billion across four deals compared to US$1.5 billion invested across five deals in November 2021. From a sector point of view, infrastructure was the top sector in November 2022, driven by investments in clean energy, with US$1.6 billion in PE/VC investments across six deals.

While exits recorded a 58% y-o-y decline, November 2022 saw a return of PE-backed IPOs with as many as 6 IPOs, the biggest being that of Five Star Business Finance with an Offer for Sale (OFS) of US$246 million.

Despite the funding slowdown over the past few months resulting in a 31% decline in year-till-date (YTD) PE/VC investments in 2022 on a y-o-y basis, it is still the second-best year for PE/VC investments, with YTD investments exceeding ~$49 billion. Further, with India dedicated fundraising at an all-time high of US$15.7 billion and global dry powder topping almost US$590 billion, there is significant availability of risk capital that can be deployed in India.

After being on a downtrend for many months, the Indian PE/VC investment activity seems to be turning over the tide in the past couple of months. A significant gap in the bid/ask spreads was the main factor slowing down deal closure activity in 2Q and 3Q22 as a result of which large deals got delayed and companies raised smaller rounds to minimise dilution. As we head into 2023, this valuation gap has reduced and at the same time, some of the global uncertainty has played out well for India, which continues to attract record levels of FDI. 

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While Fortune 500 Inc.'s need for supply chain resilience has made a strong case for Indian manufacturing, large global asset managers seem to favour India as they revise their emerging market allocations. These are encouraging signs and we remain hopeful that this uptrend in PE/VC investment and exit activity will continue into 2023. 

Rising global recession concerns, China's changing policy towards COVID and the geo-political climate remain the top three risks that can have an outsized impact on the financial and commodity markets. The high levels of dry powder globally, coupled with a more sanguine view on India amongst large Global LPs and asset managers augurs well for the Indian PE/VC industry in the coming years. An enabling business environment and favourable government policies will go a long way in attracting this risk capital into India."

Investments

PE/VC investments in November 2022 recorded US$4 billion, 42% lower than PE/VC investments in November 2021 (US$6.9 billion) and 18% higher than in October 2022. In terms of the number of deals,

November 2022 recorded a 15% y-o-y decline in deal activity while increasing by 13% sequentially. After being on a downtrend over the past two quarters, PE/VC investments have increased sequentially over the past two months, both in terms of value and volume.

November 2022 recorded seven large deals (deals of value greater than US$100 million) aggregating US$2.8 billion, a sharp drop from the 17 large deals worth US$5.4 billion recorded in November 2021. The previous month recorded six large deals worth US$2.2 million. The largest deal in November 2022 saw CDPQ buyout Eastern Peripheral Expressway for US$770 million.

By deal type, buyouts were the highest in value in November 2022 at US$1.8 billion across four deals compared to US$1.5 billion invested across five deals in November 2021 and US$534 million invested across five deals in October 2022. Startup investments were second highest, recording US$903 million across 51 deals in November 2022 compared to US$2.4 billion recorded across 62 deals in November 2021 and US$608 million invested across 47 deals in October 2022. Growth deals recorded US$865 million across 15 deals in November 2022 compared to US$2.1 billion recorded across 15 deals in November 2021 and US$2 billion recorded across 13 deals in October 2022.

From a sector point of view, infrastructure was the top sector in November 2022, driven by investments in clean energy, with US$1.6 billion in PE/VC investments across six deals (one deal worth US$537 million in November 2021). The second largest sector was logistics and transportation, with US$602 million recorded across two deals (one deal worth US$14 million in November 2021). Technology, which was the top sector in November 2021, recording US$2.1 billion, recorded a 75% decline y-o-y (US$527 million in November 2022).

Spotlight: PE/VC fundraise trends

The last six years witnessed US$57.2 billion raised by India dedicated funds. India dedicated PE/VC fundraising was on an uptrend until 2019. However, on account of the pandemic, fundraising witnessed a slowdown for two years (2020-2021). This trend has reversed in 2022, with YTD fundraise worth US$15.7 billion, an all-time high for India.

This is on the back of a global surge in PE/VC fund raising in 2021, during which PE/VC funds raised US$732.6 billion[1], an all-time high and a surge of over 19 % compared to 2020. In 2022, global fundraise stood at US$615 billion as of Q3.

The PE asset class was the largest at US$18.5 billion and accounted for 32% of all the India dedicated PE/VC fundraises in the last five years, followed by VC funds at USS$17.4 billion (30%) and real estate funds at US$8.2 billion (14.3%). Credit and venture debt funds raised US$7.1 billion (12.4%), making credit the fourth largest category. Infrastructure dedicated funds (excluding renewables) raised US$3.6 billion.

From a sectoral allocation perspective, over the last six years, more than 51% (US$29.4 billion) of the funds raised were for sector agnostic deployment, followed by the real estate sector accounting for 18% (US$10.3 billion) and technology/internet accounting for 14% (US$7.8 billion). Clean energy has been an emerging theme which has seen US$2 billion in fundraise (3.4% allocation) almost entirely by PE funds.

While sector-agnostic deployment remains the largest investing play across PE, VC, credit, stressed asset and venture debt funds, VC funds saw 30% of the funds being allocated to technology/internet-related businesses vs.13.5% by PE funds. PE funds have allocated 11% (US$2 billion) towards clean energy. Within credit funds, 43% (US$2.1 billion) of the funds are dedicated towards the real estate sector.

Exits

November 2022 recorded 29 exits worth US$1.8 billion compared to US$3.1 billion in November 2021 across 21 deals and US$1.6 billion recorded across 15 deals in October 2022. November 2022 saw a return of PE-backed IPOs with as many as 6 IPOs, the biggest being that of Five tar Business Finance with an OFS of US$246 million in which Sequoia, Norwest, Matrix, and TPG exited a 14.2% stake.

Exits via the open market were the highest in November 2022, with 13 exits worth US$857 million. PE-backed IPO exits were the second highest worth US$361 million. Secondary and strategic deals recorded US$217 million and US$357 million, respectively.