Investments by private equity (PE) firms in India fell 42% to $23.3 billion in 2022 year-on-year, the lowest since 2019, as global investment firms took a cautious approach owing to rising interest rates and geopolitical tensions, data by Refinitiv showed.
“Geopolitical tensions, rising interest rates and recession fears made global investors cautious in making investments,” said Elaine Tan, senior analyst at Refinitiv, in a note. While the invested amount is lower than that in 2020 and 2021, it is “still relatively elevated compared to historical levels,” she added.
As per the data, internet-specific and computer software companies saw the maximum investments coming in 2022. Of these, one major deal was Byju’s $800 million fundraise. Others include investment into Dailyhunt’s parent VerSe Innovation and Swiggy.
These two sectors were responsible for about 66% or about $15.3 billion of the private equity investments in India during 2022, even as the amount invested in the sector fell.
“As investors diversify away from China amid increased uncertainty in the market, India and Southeast Asia may benefit from this shift,” said Tan. “Value creation through digital transformation and increasing depth in India’s innovative start-up ecosystem continues to drive activity.”
The quantum of equity invested Internet Specific companies sunk by 57.4% to $8.6 billion across 528 deals in 2022, compared to $20.1 billion across 556 deals in 2021. The Computer Software sector saw a 46.4% decrease in investment to $6.8 billion during the year. The same trend was observed for the financial services, medical and health sectors.
However, certain sectors like transportation saw a 93% increase in investment amounts over the last year. The communications sector and agriculture/forestry/fisheries saw a massive jump of 225.6% and 215.8% respectively in comparison to 2021.
Another highlight was the rise in the number of deals, which grew to 1543, up 3% over 2021. “As deals were made in smaller sizes and investors increasingly shift their focus into other high-growth markets such as India,” added Tan.
A silver lining in this current situation was the substantial growth of PE funds located in India. which raised $13.7 billion in 2022, more than double of $5.2 billion in 2021. It points to the rise in the substantial capital waiting to be deployed by the country’s PE firms.