PE/VC investment see 11% YoY deal dip with startups witnessing a steep 42% decline: Report

PE/VC investment saw a 11% year-on-year decline in 2023 due to drop-in overall deal activity, with the number of deals falling by 33%. Startups segment witnessed a substantial 42% decline in the number of deals, leading to an even steeper drop of approximately 53% in dollar value of investments, according to India Trend Book 2024, an EY-IVCA joint report. 

In 2024,  PE/VC investments have gotten off to a good start with January investments higher than the previous month by 176% in terms of value and 43% higher than January 2023. Pure play PE/VC investments saw a notable 25% year-on-year decrease.

The report saw resurgence in real assets backed infrastructure and real estate asset classes, with a robust 23% year-on-year increase. While infrastructure emerged as the leading sector, attracting US$11.6 billion in PE/VC investments, traditional favorites, such as financial services, e-commerce, and technology, recorded declines.

The healthcare sector witnessed a record high of US$5 billion in investments. PE/VC exits surged with a remarkable 36% growth to reach US$24.8 billion on the back of open market exits, comprising 52% of total exits, and reaching a historic high of US$12.8 billion.

The report attributed buoyant capital markets for the second best year for PE-backed IPOs, at 30 IPOs from 18 in 2022. Despite the decline in investments, India focused fundraising recorded the second-highest dollar value of funds raised totaling US$15.9 billion. 

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, the report noted.