March 16
Indian start-ups received $2.5 billion worth of private equity (PE)/ venture capital (VC) investments in February 2022 across 85 deals, as compared to $1.1 billion worth of investment in February 2021 across 61 deals, according to a report by IVCA-EY.
Start-up investments accounted for 44 per cent of all PE/VC investments in February 2022. Overall, PE/VC investments in February 2022 have touched $5.8 billion across 117 deals, this includes deal types such as credit investment, private investment in public equity, buyout, start-up/early stage and expansion/growth capital.
Further, PE/VC exits in February 2022 recorded $1.4 billion across ten deals, primarily driven by secondary deals which includes the $800 million exit from IGT Solutions by AION. EY expects the number of PE-backed IPOs to be lower in 2022 given the volatility in the capital markets, rise in uncertainty and waning investor interest in the primary markets.
Dominant sectors
Vivek Soni, Partner and National Leader Private Equity Services, EY, said, “February 2022 recorded $5.8 billion in PE/VC investments, more than double the investments in February 2021 and 24 per cent higher than the previous month.”
Pure-play PE/VC investments (excluding the infrastructure and real estate sectors) and start-up investments continued to dominate the investment landscape in February 2022, accounting for 88 per cent and 44 per cent of PE/VC investment value, respectively, he said.
”While the technology sector continued to receive maximum PE/VC investments in 2022, there has been a significant surge in investments in the fintech segment of the financial services sector that saw large deals in the emerging Decentralised Finance (DeFi) space”, the report added.
Fintech investments have grown at a CAGR of 125 per cent over the past five years, primarily driven by investments in the payments ecosystem with new segments like DeFi and neo-banking recording 20x growth in investments.
Technology was the top sector in February 2022 with $1.5 billion in PE/VC investments across 19 deals. The second largest sector was financial services with $1.2 billion recorded across 26 deals. Fintech sector saw four large deals of $100 million+ with the crypto platform Polygon receiving the largest investment of $450 million. The logistics sector that saw $723 million invested across six deals was the third largest, with major investments in the logitech space.
Uncertainty remains high
“India’s position as an attractive destination for PE/VC investments is expected to remain strong in 2022 given its high growth, macroeconomic and policy stability. The recent State election results should underwrite more certainty around continuity of government reforms. With diplomatic talks resuming, there is hope emerging on the possibility of an early end to the geopolitical conflict. However, uncertainty remains high and faster than anticipated interest rate tightening by the Fed, rising inflation and commodity prices amidst geo-political tensions, alongside a resurgence in Covid infections continue to remain potential risks to watch out for,” Soni added.
Further, February 2022 recorded a total fundraising of $347 million across four PE/VC funds compared to $380 million raised in February 2021 by one fund. The largest fundraiser in February was by Trifecta, worth $199 million to invest in IPO-ready new-age businesses.