PE/VC investments nearly halve in Feb 2023

Investments by private equity and venture capital funds declined by 44 per cent to $3.7 billion in February compared to the same period a year ago, a report said on Monday.

The bets by the long-term investors were 13 per cent lower when compared to the investments in the preceding month of January, the report by industry lobby Indian Venture and Alternate Capital Association and consultancy firm EY, said.

"…rising global recession concerns, increasing cost of capital and mismatch in valuation expectations between sellers and investors are turning out to be major impediments in the deployment of capital," EY's partner Vivek Soni said.

He added that the recent events in the global financial world after the failure of SVB and the contagion spreading to other mid-market US banks catering to the technology sector has added to the overall uncertainty, and "may discourage investors from making bold bets in the immediate term".

The venture investing industry poured in $6.6 billion into companies in February 2022, while the same stood at $4.314 billion in January 2023.

In volume terms, the number of deals dropped by 60 per cent in February with 55 transactions getting recorded as against 139 in the year-ago period, the report said, adding that there were 75 deals in January 2023.

From a sectoral perspective, real estate led by bagging $2.4 billion of the overall $3.7 billion in investments with the $1.9 billion funding announcement by an arm of CDPQ and Temasek to set up an investment platform for office properties in India being at the top.

There were only nine large deals of $100 million or more announced in February, aggregating to $3 billion in overall such commitments.

February 2023 recorded 11 exits worth $731 million compared to $1.4 billion recorded in February 2022 across 13 deals, and $898 million recorded across 20 deals in January 2023, it said.

Funds dedicated to India raised $881 million as compared to $347 million in the year-ago period, it said, adding that Kotak Alternate Assets' $590 million for a data centre fund was the largest.