PE/VC investment for April 2022 declines 27% YoY to $5.5 bn: IVCA-EY report

Private equity and venture capital investments for the month of April 2022 in India were $5.5 billion, across 117 deals, including 16 large deals worth $4 billion, said a report. On a year-on-year basis this was down 27 per cent, but was up 11 per cent compared to the preceding month, said a report by IVCA-EY.

Fundraises, however, continued to show a healthy trend, with April 2022 recording a total fundraise of $1.5 billion across 16 funds compared to $569 million raised in April 2021 by 8 funds. The largest fundraise in April 2022 was by Elevation Capital, which raised its eighth India dedicated fund of $670 million, its largest-ever corpus.

Exits recorded $1.2 billion across 13 deals, including 6 open market exits worth $483 million and one buyback worth $330 million.

Vivek Soni, partner and national leader, Private Equity Services, EY said, “Growth investments were back at the top after nine months with more than 2x growth y-o-y while monthly start-up investments recorded a 50% y-o-y decline. The US Fed has started tightening monetary policy with a 50 bps interest rate hike and business risk premium /discount rates have gone up globally, which has had a significant negative impact on valuations of listed loss-making but growth-oriented start-ups. This is expected to have a spillover effect on the private capital side as well. Both start-up valuations and deal closures could see some slowdown in the coming few months.”

Nonetheless, overall PE/ VC investment flows in the Indian market continue to remain strong amidst global headwinds. The largest deal in April 2022 saw Verse Innovations raise $805 million, the second-largest in the media and entertainment sector. Riding on the post-pandemic shift in consumer preference towards consuming content and entertainment online, the Indian media and entertainment sector has seen a surge in investments since 2021. The spotlight section of our report covers this in more detail.

“While the US Fed tightening is expected to reduce global liquidity, the larger international funds are sitting on large amounts of dry powder raised last year. India, which remains one of the few large economies with strong growth, is expected to lead emerging market capital allocations. Downside risks that can temper growth expectations and PE/ VC investment activity include rising inflation, oil prices, dollar appreciation vs Indian Rupee and rising Indian interest rates,” said Soni.

April 2022 recorded 16 large deals (deals of value greater than or equal to $100 million) totalling $4 billion, compared to 17 large deals worth $6.3 billion in April 2021 and 12 deals worth $2.7 billion in March 2022.

By deal type, growth deals received maximum PE/ VC investments in April 2022 at $2.8 billion across 21 deals ($904 million in April 2021 across 12 deals). Growth investments have obtained the monthly top spot after 9 months and accounted for 51 per cent of all investments in April 2022. Start-up investments were the second-highest with $1.6 billion invested across 82 deals ($3.0 billion across 41 deals in April 2021). Buyouts recorded $707 million across three deals (five deals worth $3.2 billion in April 2021). PIPE investments recorded $174 million across three deals (five deals worth $203 million in April 2021). Credit investments recorded $157 million across eight deals ($244 million across seven deals in April 2021).

The financial services was the top sector in April 2022 with $1.5 billion in PE/ VC investments across 22 deals ($616 million across 13 deals in April 2021).

After a long time, the infrastructure sector recorded large deals, taking the second spot with $896 million invested across 6 deals ($217 million invested across five deals in April 2021). This was mainly on account of the $516 million investment in TATA Power’s renewable energy arm by Blackrock and Mubadala. The third-largest sector was media and entertainment with $840 billion recorded across six deals ($515 million across three deals in April 2021), propped up by the large $805 million PE/ VC investment in Verse Innovations.

The online media and streaming sector was the largest sub-sector accounting for more than 50 per cent of PE/ VC investments by value and volume between 2017-2022 (Jan-Apr). Online gaming was the next largest sub-sector accounting for 31 per cent of the PE/ VC investments by value and 22% by volume.

Five start-ups – Dailyhunt, Sharechat, Dream Sports Fields, Dream11, and the Ahmedabad IPL franchise – have received almost 60% of all PE/ VC investments in the sector since 2017.

Exits

April 2022 recorded 26 exits worth $1.2 billion compared to $2.7 billion recorded across 13 exits in April 2021 and $2.3 billion across 26 exits in March 2022.

In April 2022, open market exits were the highest in terms of value worth $483 million across six deals ($17 million across three deals in April 2021). Buybacks were the second-highest with the $330 million buybacks done by Mu Sigma of its stake from General Atlantic and Sequoia Capital. Strategic exits were the highest in terms of numbers with 16 deals. However, the deal values were undisclosed on 14 deals (four strategic deals worth $400 million in April 2021).