Inflows from private equity & venture capital funds to domestic cos dips to $27.9 bn

Investments from private equity and venture capital funds into domestic companies declined about 40 per cent to $27.9 billion so far this year, while the outflow increased marginally to $19.34 billion year-on-year. According to the numbers collated by Venture Intelligence that tracks private capital and debt flows, and industry body IVCA, investments by private equity and venture capital funds as of December 20, 2023, fell to a low of $27.9 billion across 697 transactions, as against $47.62 billion inflows in 2022 across 1,364 deals.

The year also saw more money being pulled out from the country by private equity players with overall exits touching $19.34 billion from 248 companies as against 233 exists worth $18.45 billion in 2022, according to the data. Industry watchers, however, said green shoots of more funding is very much visible in the coming year.

The funding slowdown this year is a temporary adjustment, and as we move forward, we expect renewed and robust inflows, said Rajat Tandon, president of IVCA (Indian Private Equity and Venture Capitalist Association).

He said the ongoing green shoots of funding indicates an opportune time for venture capitalists, domestic private equity and private capital firms to create pools of capital to cash in on emerging opportunities in the domestic startup ecosystem, which demonstrates resilience in the face of challenges, offer innovative solutions to current market needs, and possess the potential for sustainable growth.

According to Tondon, the decline in investments this year mirrors the trend of larger but fewer investments, indicating a focus on projects and businesses that have the potential to create substantial value and foster sustainable growth.

The top five investments of the year included TPG Capital and Temasek pumping in $2.4 billion into Manipal Hospitals in April, followed by HDFC Credila (the education loans arm of the now defunct HDFC right before its merger with HDFC Bank) being snapped up by Baring Asia and ChrysCapital for $1.35 billion in June; Qatar Investment Authority pumping in $1 billion into Reliance Retail Ventures in August; the renewable player Avaada Ventures getting $1 billion from Brookfield in April; and fertility clinic Indira IVF Clinics getting $732 million from Baring Asia in July. Venture Intelligence said the fall in volumes is a strategic refinement and suggests a strategic approach to investment, focusing on quality and sustainability along with optimizing opportunities and ensuring a more discerning selection process for long-term value creation. a