Executive summary
- The year 2022 saw a global tempering of the peak activity witnessed in 2021, triggered by tightening monetary policies across American and European markets as economies emerged from a Covid-19- induced suppression in economic activity.Indian PE-VC investments surpassed $60 billion for a third time, as India demonstrated some resilience in the face of global headwinds. Investment value closed at $61.6 billion, with a moderate decline of 12% from 2021’s peak of $69.8 billion, supported by a positive economic outlook
- The exuberance at the start of the year, with record dealmaking of close to $40 billion in the first 6 months, was followed by decelerating deal activity closing at $21 billion. Traditional sectors such as banking, financial services, and insurance (BFSI), energy, healthcare, and manufacturing, grew by approximately 50% due to robust domestic demand and accounted for around 60% of deals greater than $100 million.As a result, consumer tech and information technology (IT), which drove around 60% of deal value in 2021, contracted to ~30% in 2022.
- The exuberance around new-age internet start-up listings waned as initial public offerings (IPOs) of 2021 didn’t meet public market expectations—cascading into delays and eventual cancellations of many planned IPOs of consumer tech firms, such as OYO, MobiKwik, PharmEasy, BoAt, and others.
- BFSI, which experienced a slump due to Covid-19, lower growth, extended loan moratoriums, and an increased risk of default, is witnessing a resurgence in interest. BFSI, including fintech, saw investments of $9.7 billion, with the sectors commanding 18% of India’s PE-VC investments
- BFSI, which experienced a slump due to Covid-19, lower growth, extended loan moratoriums, and an increased risk of default, is witnessing a resurgence in interest. BFSI, including fintech, saw investments of $9.7 billion, with the sectors commanding 18%of India’s PE-VC investments
As Per the report by IVC Association and Bain & Company
Credits: This full report is published by IVC Association and Bain & Company
Source: IVC Association and Bain & Company
Authors and Acknowledgments
- Arpan Sheth is a partner in Bain & Company’s Mumbai office. He leads the firm’s Asia-Pacific Technology, Vector, and Advanced Analytics practices, as well as the India Private Equity and Alternative Investors practice.
- Sriwatsan Krishnan is a partner in Bain & Company’s Mumbai office. He co-leads the India Private Equity practice
- Aditya Shukla is a partner in Bain & Company’s Mumbai office and a leader in Bain India’s Private Equity practice.
- Prabhav Kashyap is a partner in Bain & Company’s New Delhi office and a leader in Bain India’s Private Equity practice.
- Ronika Sapra is an associate partner in Bain & Company’s New Delhi office and a leader in Bain India’s Private Equity practice
We deeply thank the Bain India team, including Amanpreet Talwar, Aakriti Gupta, Shreyas
Bhargav, Tanya Kamdar, Samarth Hazari, Nitya Pahuja, and the Bain Capability Network team for
their in-depth research and analytical rigour. We also wish to thank Shelza Khan and Maggie
Locher for their editorial support.
Dealmaking and exits: A year of reckoning
- 2022 was a year of recalibration for PE-VC investments in India, declining from the record highs of $70 billion in 2021 to $62 billion in 2022 amid global headwinds. Structural enablers helped India surpass $60 billion in investments for a third time in a demonstration of resilience.
- IT/ITeS buyouts, commanding a share of $10 billion of the all-time high in buyout value of $16 billion in 2021, contracted as multiple IT sector deals failed to close due to a mismatch in valuations. The increasing cost of credit and rise in hedging costs also put a damper on buy-out activity.
- Exit activity slowed in 2022 to $24 billion across all modes of exit after an all-time high of $36 billion in 2021, but surpassed activity seen pre-2021. Traditional sectors dominated the share of exits greater than $100 million, with healthcare and manufacturing showing the largest increase in exit value
- Secondary sales volume declined by around 35% over 2021 to 2022, and the public market exit route through IPOs came to a halt, as many companies deferred listings with 2021’s new-age internet start-up listings underperforming on the public markets. However, traditional sectors saw an expansion in follow-on public market sales amidst a buoyant public market.
As Per the report by IVC Association and Bain & Company
Credits: This full report is published by IVC Association and Bain & Company
Source: IVC Association and Bain & Company
Sectors in focus: BFSI and healthcare
- India’s BFSI and fintech sectors have seen a resurgence in interest, with deals worth over $5 billion and $4 billion, respectively, in 2022. Together, they account for 18% of the country’s PE-VC investments, driven with growth in overall outstanding credit, which has doubled since 2014 to reach $2 trillion
- NBFCs have expanded coverage to new-to-credit customers that are underserved by banks and built expansive on-ground networks in tier 2/3 cities and rural areas that further enable cross-selling opportunities. These growth initiatives are supported by innovative underwriting and collection processes to streamline debt recovery.
- 2022 was a year for marquee healthcare exits, which expanded to about 16% of India’s exit value at $3.5 billion, despite forming just about 8% of total PE-VC investments. Of this, nearly 85% of exits were driven by health providers across public market exits, IPOs and secondary sales.
As Per the report by IVC Association and Bain & Company
Credits: This full report is published by IVC Association and Bain & Company
Source: IVC Association and Bain & Company
ESG: Moving from mind-share to wallet-share
- ESG investing witnessed a sharp uptick in 2022, in a signal of a move from “mind-share” to “wallet-share.” Investments in ESG assets increased from 5% of overall investment value to 13% over 2021 to 2022 with about a 2.4x increase in deal value to nearly $7.9 billion
- ESG investment is largely concentrated in clean energy (solar, wind power, etc.) and electric mobility, especially EV manufacturing—these themes contributed to approximately 90% share of $19.2 billion invested in ESG across 2018 to 2022
- Electric mobility segment has grown at approximately 150% CAGR over 2018 to 2022, driven by an increasingly favourable TCO—EV penetration is likely to go up significantly in the next 5 years to 18% to 20% for 2W, about 25% for 3W (excluding e-rickshaws), and about 5% for 4W.
As Per the report by IVC Association and Bain & Company
Credits: This full report is published by IVC Association and Bain & Company
Source: IVC Association and Bain & Company
The investor perspective: Resilience with an eye on wins
- Top global and Indian investors expanded their presence in India in 2022 with larger fund-raises, increased India allocations and faster closes riding on the momentum of 2021. Leading Indian GPs such as Kedaara Capital and ChrysCapital crossed $1 billion in fund sizes and global funds are allocating increasing share of Asia-Pacific-focused funds towards India.
- Investors also accelerated sector diversification this year—average sector spread for top investors increased from about 3 in 2021 to about 5 in 2022. More funds are expanding into traditional sectors like healthcare, BFSI, energy, and manufacturing, bucking a trend between 2018 and 2021 where sector expansion was led by tech sectors.
As Per the report by IVC Association and Bain & Company
Credits: This full report is published by IVC Association and Bain & Company
Source: IVC Association and Bain & Company
Looking back to look ahead: India’s accelerating flywheel
- Investors with depth in India exposure have witnessed tremendous growth in exit opportunities, with secondary and strategic sales markets growing manifold. Since the 2010s, many high-quality assets with specialised play have enabled value capture of 10x to 20x for multiple investors across investment cycles.
- Investors with depth in India exposure have witnessed tremendous growth in exit opportunities, with secondary and strategic sales markets growing manifold. Since the 2010s, many high-quality assets with specialised play have enabled value capture of 10x to 20x for multiple investors across investment cycles.