For the first time, 14 sectors received over $1 billion each in investments in 2021, with technology and financial services cornering most of the investor capital, a report jointly published by industry body IVCA (Indian Venture and Alternate Capital Association) and consulting firm EY said.
The technology sector, which threw up several unicorns, or private companies with a valuation of $1 billion, last year, notched up over $16.3 billion in total funding. This was followed by ecommerce with $15.9 billion. These two sectors accounted for 42% of all the investments in 2021, the report said.
“This shift was driven by a global trend which saw PE/VC (private equity and venture capital) funds favour investments in internet and technology enabled business that saw a steep ramp up in consumer adoption during the pandemic that shortened the earlier envisaged digital adoption cycle,” the report said to explain the drive for technology focused investments.
The financial services sector dropped to the third place despite receiving a record $11.7 billion in funding after being a leader over the previous decade.
These top three sectors were followed by infrastructure ($5.4 billion), real estate ($5.3 billion), media and entertainment ($4.9 billion), education ($3.7 billion), pharmaceuticals ($2.3 billion), healthcare ($2 billion), retail and consumer products ($1.95 billion), automotive ($1.74 billion), telecommunications ($1.42 billion), food and agriculture ($1.27 billion) and logistics and transportation ($1.25 billion).
New themes like edtech, electric vehicles, gaming, online streaming, and sports-based entertainment also recorded significant PE/VC investment flow of over $10 billion, the report noted.
Some of the traditional bulge bracket PE funds like TPG and CVC among others also made large outlays in these emerging themes which had traditionally seen small ticket venture capital funding Startup investments emerged as the top segment, recording $28.5 billion and accounting for 37% of all PE and VC investments in 2021. “Investments in startups was a defining feature of 2021 which saw India overtake UK as the third largest ecosystem for start-ups with 2021 recording 44 unicorns,” the report pointed out.
The year that went by also was spectacular in terms of exits. The exits crossed $43 billion in terms of value, more than seven times the value recorded in 2020. The large exits tally was driven by mega deals in exits via sale to strategics and secondary deals among PE and VC funds.
Secondary exits in 2021 were the highest ever both in terms of value and volume, standing at $14.4 billion across 56 deals.
Initial public offering (IPO) became the most effective instrument for the funds to score profitable exits. PE-backed IPOs were at an all-time high with 44 IPOs raising $13.1 billion and providing a major liquidity event for funds which is said to have garnered $5.1 billion in the offer-for-sale (OFS) component of these IPOs, the report added.
