PE/VCs investment in India falls 44% to $3.5 bn in May

Private equity and venture capital funds' investment in the country continued to fall in May, with the overall values declining by nearly 44 per cent to $3.5 billion, a report said on Monday.

The dedicated funds had invested $6.2 billion in May 2022 and $7.4 billion in the preceding month of April 2023, representing a dip of 44 per cent and 52 per cent, respectively, as per the report by industry lobby IVCA and consultancy firm EY.

"Despite a recovery of sorts being seen in tech sector indices and some of the large global tech names, sentiment in India for tech sector investments has been lacklustre, and fundraising by Indian startups has been sluggish," the firm's partner Vivek Soni said.

There is a high level of dry powder with the funds courtesy of the large fundraises over the past one-and-a-half years, but most of them are "circumspect with deployment and are focusing significant efforts on managing existing portfolios that are struggling with maintaining growth and margin improvement", he added.

Only healthcare and financial services have witnessed some investments, Soni said, adding that the medium- to long-term outlook remains positive and the overall deployments in 2023 will surpass the previous year's number.

In May 2023, the overall deal activity by volume stood at 71 transactions, 42 per cent lower than the year-ago period.

Growth investments declined 4 per cent to $1.9 billion across 17 deals, compared to $2 billion invested across 19 deals in May 2022, while the pureplay PE/VC (Private equity and venture capital) investments at $2 billion across 62 deals was 52 per cent down by value.

Real estate was the favourite sector for the funds in May 2023, recording $1.2 billion in PE/VC investments across seven deals against 12 deals worth $1.1 billion in May 2022.

The technology sector was the second largest sector, with $864 million invested across 15 deals, a 159 per cent rise over May 2022.

The month recorded 20 exits worth $1.8 billion compared to $511 million in May 2022 and $1.6 billion in April 2023.

Funds have raised $2.2 billion in the month against $745 million in the year-ago period, the report said.