PE/VC investment will fall by a third to $54.2 billion in 2022

Investments by private equity and venture capital funds fell by almost a third to USD 54.2 billion in 2022, which was marked by a ‘financing winter’ after consecutive years of strong growth. Even after the decline, the year was India’s second-best year in terms of such long-term investors’ bets on growing Indian companies, according to a report by industry lobby Ivca and the consultancy EY.

Investments in value fell 29 percent compared to USD 75.9 billion in 2021, while in terms of volume there was a 4.6 percent decline with 1,211 transactions versus 1,269, the report said, adding that a sharp drop in large deals resulted in the rejection.

The firm’s partner, Vivek Soni, said investor interest has been dampened by inflation concerns, recession fears, the rising cost of capital and heightened levels of uncertainty due to geostrategic challenges.

He added that 99 funds dedicated to India raised $17.4 billion by 2022, and that there is a high level of dry powder available globally, which has the potential for an uptick in activity.

“We expect the startup space to continue to receive large investments, albeit at valuation multiples lower than 2021. Indian PE/VC investment is likely to be significantly more in 2023 than in 2022,” he said.

Factors to watch for in the future include headwinds such as a recession in the developed world, the re-emergence of inflation, any flare-ups in geopolitical conflicts, and potentially new and contagious COVID-19 variants.

In 2022, the financial services industry recorded maximum interest both in terms of value of $10.8 billion and volume with 249 deals, the report said.

In terms of exits, there was a 55 percent drop to $18.3 billion through 249 deals, suggesting that the lack of major strategic and secondary deals caused this.

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(This story has not been edited by News18 staff and was published from a syndicated news agency feed)