In the dynamic landscape of private equity and venture capital investments in India, 2023 witnessed a notable 11% year-on-year decline, attributed largely to a drop in overall deal activity. According to the India Trend Book 2024, a collaborative effort by EY and IVCA (Indian Private Equity & Venture Capital Association), the number of deals plummeted by 33%, signaling a challenging year for the investment ecosystem. Particularly impacted was the startups segment, which experienced a substantial 42% decline in deal volume, leading to an even sharper drop of approximately 53% in the dollar value of investments.
However, the onset of 2024 has brought promising signs, with PE/VC investments kicking off on a positive note. January investments surged by 176% in terms of value compared to the previous month, and showed a 43% increase compared to January 2023. Despite these optimistic indicators, pure-play PE/VC investments saw a notable 25% year-on-year decrease, reflecting ongoing market uncertainties.
A notable trend highlighted in the report is the resurgence of real assets backed infrastructure and real estate asset classes, which witnessed a robust 23% year-on-year increase. Infrastructure emerged as the leading sector, attracting a substantial US$11.6 billion in PE/VC investments. Conversely, traditional favorites such as financial services, e-commerce, and technology recorded declines in investor interest.
The healthcare sector stood out with a record high of US$5 billion in investments, underlining the growing focus on this critical segment. PE/VC exits also surged, experiencing a remarkable 36% growth to reach US$24.8 billion. Open market exits comprised 52% of total exits, reaching a historic high of US$12.8 billion.
Buoyant capital markets contributed to the second-best year for PE-backed IPOs, with 30 IPOs compared to 18 in 2022. Despite the overall decline in investments, India-focused fundraising recorded the second-highest dollar value of funds raised, totaling US$15.9 billion. Additionally, the number of funds successfully raised reached an all-time high of 102.
While challenges such as high valuations, regulatory uncertainties, and shifting investor sentiments persist, they also present opportunities for innovation and adaptation. Startups backed by strategic investments and prudent growth strategies are poised to navigate through these challenges and emerge stronger. As the report notes, the Indian PE/VC landscape remains resilient, with ample room for growth and transformation in the coming years.