PE/VC investments in the first quarter of 2022 has increased by 54 per cent year-on-year (yoy), amounting to $15.5 billion across 360 deals, including 45 large deals worth $10.1 billion, according to IVCA-EY PE/VC monthly roundup.
Further, the ecosystem recorded $4 billion worth of exits across 53 deals in Q1 2022, including nine secondary exits worth $2 billion. Vivek Soni, Partner and National Leader - Private Equity Services, EY, said, “Q1 2022 recorded $15.5 billion in PE/VC investments, 54 per cent higher than the investments in Q1 2021. Start-up investments continued to drive the momentum in PE/VC investments in Q1 2022 with a 170 per cent yoy increase, accounting for more than 50 per cent of all PE/VC investments during the quarter.”
Despite the global geopolitical tensions, PE/VC investments in India have maintained a steady monthly run-rate of over $4.5 billion. While start-up investments have surged in Q1 2022 recording some of the largest deals during the quarter in Logitech (ElasticRun), crypto (Polygon) and hyperlocal delivery (Swiggy), buyouts have been the lowest in the past four quarters, recording a little over $2 billion across 15 deals.
Drought in PE-backed IPOs
PE/VC exits recorded the lowest value in the past five quarters at $4 billion in the absence of large strategic and secondary deals. Moreover, a drought in PE-backed IPOs has further dampened the value of PE/VC exits. Nonetheless, the past three months have recorded a rising trend in the number of exits despite the absence of PE-backed IPOs. Also, Q1 2022 had many strategic exits where the deal values were not disclosed, thereby suppressing the reported aggregate exit value.
Financial services received the highest amount of PE/VC investments at over $3 billion in Q1 2022, followed by e-commerce and technology sectors, both of which received over $2.5 billion in PE/VC investments. While India’s position as an attractive destination for PE/VC investments is expected to remain strong in 2022 given its high growth and macroeconomic and policy stability, the continuing geopolitical tensions, rising inflation, quantitative tightening by the US Fed and inversion in the US yield curve are potential downside risks, making investors circumspect. We continue to remain ‘cautiously optimistic’ about 2022 PE/VC investment and exit activity exceeding the 2021 record-highs.”