Private equity and venture capital funds invested $ 21 billion in "healthy territory"

By siliconindia  |  Thursday, 31 August 2023, 10:25 IST

Private equity and venture capital funds invested $ 21 billion in
Risk capital inflow into Indian companies and startups has entered “healthy territory,” according to industry members, as funding grew steadily in the second quarter of 2023. Private equity and venture capital funds invested $ 21 billion in the first six months of 2023, on par with the value of deals recorded in the first half of 2019, according to a research note by Bain & Company shared exclusively. The consultancy firm stated that the trend lines pointed to a “sharp reset for the PE-VC landscape,” which has battled a so-called “funding winter” as risk capital inflow to India had dried up from the latter half of 2022.
This downturn followed a boom in private equity and venture capital investment witnessed in 2021 and the early part of 2022 when Indian startups received a record inflow of capital. The subsequent downward trend in risk capital investments has changed in the three-month period ending June 2023, the data revealed. PE and VC investments reached $13 billion in the period, clocking 60% growth over January-March, propelled by large deals concentrated in the second quarter.
Dev Khare, partner, Lightspeed India that following the imbalance witnessed in the last few years, the investment ecosystem has become healthier and has more depth in terms of experienced founders starting up.“If you compare it with 12 months ago, it’s a funding winter, but overall if you look at 2018, 2019, it’s more now than it was before,” he said. Pointing to a “little bit of imbalance in the middle,” Khare said it is “healthy right now. “We’ve made a record number of investments as Lightspeed this year itself. We’ve made seed, Series A and Series B investments, and we’ve signed growth investments as well,” he added.
To be sure, Bain pointed out that while PE investments grew in the first half of 2023 over the second half of last year, VC investments fell by 25%. Notably, in the January-June period, investments in Walmart-owned fintech company PhonePe and omnichannel retailer Lenskart accounted for 30% of VC funding, it added. Venture investors are now taking a harder look at the business models of potential portfolio companies.
Bain noted that the share of investments in segments such as banking, financial services, and insurance (BFSI), healthcare, energy, and consumer and retail is back to pre-Covid levels of approximately 75%. This is a reversal of the share taken over by IT, software as a service (SaaS), and consumer tech companies during the frenzy of 2021-22. IT, SaaS, and consumer tech investments contributed to over 70% of all deal value during that period. Some of these deals include the acquisition of HDFC Credila Financial Services (the education loans vertical of the HDFC group) by a consortium led by BPEA EQT group (formerly Baring Private Equity Asia) for Rs 10,350 crore and the Rs 800 crore investment in another education-focused non-banking financial company Avanse Financial Services by homegrown PE firm Kedaara Capital.

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