PE-VC investments slows down however India stays a vivid spot in APAC: Bain & Co

Indian non-public fairness and enterprise capital (PE-VC) funding softened by 35 per cent to ~$39 billion in 2023 from ~$62 billion in 2022, returning to pre-COVID exercise ranges. In comparison with VS exercise, PE investments registered an 18 per cent decline as large-scale dealmaking continued for high-quality belongings. However, India remained a vivid spot in Asia-Pacific. 

In response to Bain & Firm’s ‘India Non-public Fairness Report 2024’ in collaboration with Indian Enterprise and Alternate Capital Affiliation (IVCA), investments have been focussed on conventional industries like healthcare, vitality, and manufacturing. 

Even because the PE-VC investments declined on the again of worldwide slowdown, India remained a vivid spot in Asia-Pacific, mentioned Prabhav Kashyap, Companion at Bain & Firm, and co-author of the report. Kashyap mentioned that India’s share of APAC PE-VC funding elevated from ~15 per cent in 2018 to ~20 per cent in 2023. 

“Investor confidence within the nation’s sturdy progress story and robust fundamentals stays agency, with funds actively diversifying into new sectors/asset courses exterior core areas and persevering with to scale their India groups,” mentioned Kashyap.

INDIAN EXITS

The report highlighted 2023 as a marquee 12 months for Indian exits with exit values hovering by 15 per cent to $29 billion, and an increase in exit volumes from 210 to 340. 

The exits have been pushed by public market gross sales – that comprised half of the exits by worth. Block/bulk trades accounted for 90 per cent share by worth and have been outstanding throughout conventional and new-age sectors, the report said. 

India noticed $29.6 billion PE investments in what remained a subdued 12 months globally for personal fairness globally, registering a drop of 18 per cent from 2022’s peak worth of $36 billion. PE contributed to ~75 per cent of complete PE-VC deal worth.

The drop in VC investments was a lot sharper with investments at $9.6 billion in 2023, from $25.7 billion in 2022. The report added that traders prioritised unit economics over the expansion and recalibrated their methods, resulting in a lower in VC deal move. 

FOCUS ON TRADITIONAL SECTORS 

In the meantime, conventional sectors confirmed resilience and gained share – ~75 per cent of PE-VC investments in 2023 –  as in comparison with ~60 per cent in 2022. This progress was pushed by traders’ prioritising supporting companies with mature working economics and secular progress traits. 

Investments in healthcare reached ~$5.5 billion in 2023, whereas notable exercise was seen in electrical automobile OEMs with quite a few offers price over $100 million, pushed by the rising EV penetration. Packaging too noticed a number of over $100 million offers into firms that had over 70 per cent gross sales from exports. 

2024 OUTLOOK

The Bain & Co report said that PE-VC deal-making is anticipated to stay tempered in 2024 amid world macroeconomic stabilisation. Conventional sectors comparable to infrastructure, healthcare, superior manufacturing, and renewable vitality are prone to entice outsized investments as a consequence of constructive fundamentals, supportive coverage atmosphere, and emergence of scale belongings. 

“Whereas India PE-VC dealmaking is anticipated to stay considerably cautious in 2024, India’s sturdy fundamentals coupled with a supportive coverage atmosphere, will proceed to attract sturdy curiosity from traders, particularly in conventional sectors like manufacturing, which advantages from world macro tendencies like provide chain diversification,” mentioned Sai Deo, Companion at Bain & Firm, and co-author of the report.

Healthcare and superior manufacturing throughout sub-segments are anticipated to see sturdy exercise in 2024. Inside superior manufacturing, packaging, electronics, and EVs are prone to see an uptick in deal exercise. Indian producers are anticipated to be benefitted by the worldwide provide chain diversification, said the report. Export-oriented sectors comparable to electronics, pharma (particularly in APIs & CDMOs), and chemical substances (specialty chem and agrochem) are anticipated to be notably benefited. 

“The rise in home investor participation displays rising confidence in India’s financial system. With India rising as a key participant in Asia-Pacific PE-VC exercise, the inflow of capital from each home and world funds signifies a promising future,” mentioned Rajat Tandon, President, IVCA.