PE, VC investments down 63% to $9 billion in 2023, lowest since 2016

Fundraising activity for funds located in India saw a 51% decline compared to a year ago and amounted to $6.6 billion in 2023.

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Amidst geopolitical uncertainties and tight credit markets, private equity and venture capital investments in India dropped by 63 per cent in 2023 compared to the previous year, with the sum of equity investments amounting to $9 billion. This marks the lowest annual period by value for PE/VC investments in India since 2016, according to data analysed by  LSEG Deals Intelligence.

In the fourth quarter of 2023, private equity investments amounted to $1.9 billion, indicating a 43.5% substantial decline from $3.35 billion in the year-ago period and a 6.2% improvement from Q3 2023. The total number of deals in Q4 2023 declined by 27.9 per cent to 274 compared to 380 in Q4 2022.  This brings private equity investments in 2023 to US$8.97 billion, down 63% from a year ago.

The challenging macroeconomic environment resulted in the total PE fundraising activity in India to touch $6.6 billion in 2023, down 50% from a year ago.

In terms of industry-specific investments, Internet  and Computer Software have seen the maximum investments coming in 2023 and captured 60 per cent of the market share. The sum of equity invested in the Internet Specific sector has decreased by 59.2 per cent, with the number of deals falling to 378 from 562 from the year 2022. Computer Software (-72.6% yoy), Transportation (-46.5% yoy), have witnessed a decline in the sum invested as compared to 2022. However, industries catering to Industrial (13.2%), and Semiconductor/ Electr (70.3%) saw an increase in the sum of equity invested.

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"Given the record amount raised by India-based PE funds in 2022 (US$13 billion), substantial capital remains poised for deployment. While persistent headwinds may impede growth, the increased investor interest in India’s growing sectors, such as technology, healthcare, and renewable energy, along with the China-to-India narrative, and the expectations for lower interest rates in 2024, stand as potential drivers likely to bolster activity in the forthcoming year," said Elaine Tan, Senior Manager, LSEG Deals Intelligence.