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Mumbai: According to the IVCA-EY monthly PE/VC roundup, August 2022recorded investments worth US$2.2 billionacross 83 deals, includingfivelarge deals worth US$972million.Exits recordedUS$3.1billion across 25 deals in August2022, the highestvalue of exits in 2022.

Vivek Soni, Partner and National Leader, Private Equity Services, EY said,“August 2022 recorded US$2.2 billion in PE/VC investments, 80% lower than the investments in August 2021. After remaining resilient for almost seven months amid global headwinds of tightening liquidity and rising inflation, Indian PE/VC investment flows for the first time have shown tepidness, reaching a nineteen-month low. Investors are being more circumspect in making investment decisions and taking longer to close deals as the competitive pressures witnessed in the previous year have ebbed and the cost of capital has gone up.

All deal segments recorded sharp declines on a y-o-y basis, in the range of 70%-90%, primarily due to the absence of large deals. August 2022 recorded just fivelarge deals (deals of value greater than or equal to US$100 million) aggregating US$972million, compared to 18 large deals worth US$9.2 billion in August 2021 and seven deals worth US$3.3 billion in July 2022.

However, PE/VC exits had a strong showing in August 2022, recording its best performance this year with 25 exits worth US$3.1 billion, a significant improvement over the previous month that recorded US$322 million across nine deals, on the back of a few large open market exits that saw KKR sell its 28% stake in Max Health for US$1.2 billion and Blackstone sell its 14% stake in Sona BLW for US$509 million.

Most sectors recorded a sharp decline in PE/VC investments in August 2022. The healthcare sector, however, bucked the trend to record a y-o-y increase of 485% in PE/VC investments. The healthcare sector in India has grown in favour among PE/VC funds in recent years, receiving almost US$9.5 billion India continues to be one of the strongest economies globally, recording 13.5% growth in 1Q of FY23 and also overtaking the UK to become the fifth largest economy in the world. This, amid fears of the US already being in a recession and Europe too being on the brink of one, strengthens India’s case as an investment destination. Nonetheless, in the connected global economy, India is feeling pressure due to the falling rupee and rise in inflation. The rising cost of capital is making fundraising difficult for many businesses and only those with a strong growth pathway and sustainable unit economics are seeing investor interest. Further, with the FED hardening its hawkish stance, the global financial markets have retracted most of their recent gains, dampening investor sentiment. We expect PE/VC investment activity to remain sluggish in the near term till valuation expectations correct.”

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