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Private equity (PE) and venture capital (VC) investments in India fell by around 41 per cent to $27.89 billion across 697 deals in 2023 so far, compared to $47.62 billion across 1,364 deals in the previous year, according to a report on Wednesday.
However, PE exits increased slightly during the year to $19.34 billion from 248 companies, up from 233 exits worth $18.48 billion in 2022.
Meanwhile, VC exits increased from $3.09 billion across 113 deals in 2022 to $3.46 billion from 79 deals this year so far, said the report by Venture Intelligence and the Indian Venture Capital Association (IVCA).
The report added that dip in deal volumes reflects a deliberate move by investors towards more selective, impactful investments.
“The decline in the number of deals could signify an increased efficiency in decision making, allowing stakeholders to concentrate on opportunities that promise long-term value and sustainability,” it said.
The reduction in investments comes at a time when the Indian startup world is going through the so-called “funding winter”, marked by investors tightening their purse strings.
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After a prodigious influx of capital in 2021, startups had raised a massive $42 billion during the year. Markets have since begun to recalibrate, resulting in a slowdown in investment activity.
“In 2023, India's venture capital landscape is undergoing a notable recalibration. The overall funding is less than previous years, indicating a shift towards more sustainable investments. This period is proving an excellent opportunity for businesses focused on customers and revenues rather than just raising capital,” said Anirudh A Damani, managing partner, Artha Venture Fund, a micro-VC firm.
Despite a decline in investments, PE/VC players focused on the Indian market are currently sitting on the highest ever pool of unallocated capital that is ready to be invested.
As of March 2023, these funds have been sitting on dry powder pool totalling almost $16 billion, according to data from research firm Preqin.
With startup funding witnessing resurgence in the last month of 2023, industry watchers say that this unallocated capital is expected to be deployed gradually going into the New Year.
“There has been an uptick in venture activity in the last quarter of 2023, and we expect this trend to continue. Although venture activity will increase, it probably will not reach 2021–22 levels as some course correction has happened. A lot of initial public offerings are also set to happen. So, from a VC ecosystem perspective, it will be a better year,” said Sukhmani Bedi, partner at Orios Venture Partners.
