PE investments plunge by 75% in Q1 to $2.2 bn, fundraising hit too: Refinitiv

• Private equity investments in India saw its sixth consecutive quarterly decline during the first quarter of 2023.
  
• This is the lowest start to a year by value for PE investments in India since 2018 ($1.7 billion).
  
• The internet- specific, computer software, and consumer-related industries received the most investments during Q1 2023.
  

Private equity investments in India fell by a massive 75% year-on-year in the January-March quarter of 2023, to $2.2 billion, says a report by Refinitiv. In the same quarter last year, PE investments stood at $8.8 billion.

“This is the lowest start to a year by value for PE investments in India since 2018 ($1.7 billion),” said Elaine Tan, senior analyst at Refinitiv, a provider of financial market data and infrastructure.

Even on a sequential basis, PE investments fell 32%, registering a sixth consecutive quarterly decline as macroeconomic headwinds took their toll, according to The India Private Equity Snapshot for Q1 2023.

At 282 deals, the number of deals during Q1 2023 also shrunk by 19.9% from the previous quarter's 352 deals. On an annual comparison, it shrunk by 31%.

“Private equity investments in India saw its sixth consecutive quarterly decline during the first quarter of 2023 as global macroeconomic and geopolitical headwinds drove caution in investment activity,” Tan said.

Computer software, internet companies remain favourites

Computer software and internet specific companies continue to attract maximum PE interest with $392 million and $870.9 million invested in Q1 2023.

However, even the computer software sector saw its sum of equity invested decrease by 85% as the number of deals declined to 88 in Q1 2023 from 123 in Q1 2022.

“Internet-specific and computer software companies continued to attract the largest share of private equity capital in India. However, its share of equity invested declined in the first quarter of 2023 to 58% from 75% from the same period last year due primarily to fewer deals in the market,” says Tan.

The sum of equity invested in internet-specific (-78.3% YoY), consumer-related (-83.9% YoY), and transportation (-72.3% YoY) decreased in Q1 2023 compared to the same quarter in the previous year.

However, the energy and industrial sector (361% YoY) and the medical and health industry (310.5% YoY) saw an increase in the sum of equity invested.

“India’s robust startup ecosystem makes it an increasingly attractive destination for investments and companies seeking to access the Asia-Pacific markets beyond China,” says Tan.

Due to unstable market conditions and uncertainty, private equity fundraising activity in India decreased by 41% in the first quarter of this year compared to the same quarter in 2022. It also experienced a 45% decline sequentially.