- October 2022 recorded US$3.3 billion in PE/VC investments, 60% higher than September 2022.
- October 2022 recorded 15 exits worth US$1.6 billion, a significant improvement over the previous month that recorded US$653 million across 24 deals
Mumbai, 11 October 2022: According to the IVCA-EY monthly PE/VC roundup, October 2022 recorded investments worth US$3.3 billion across 75 deals, including six large deals worth US$2.2 billion. Exits were recorded at US$1.6 billion across 15 deals in October 2022.
Vivek Soni, Partner and National Leader, Private Equity Services, EY said, "October 2022 recorded US$3.3 billion in PE/VC investments, 75% lower than the investments in October 2021, which was a record month. After being on a declining trend for the past five months, PE/VC investments have recorded a sequential uptick in October 2022, a 60% increase. In terms of the number of deals, October 2022 recorded 75 deals, a 43% decline y-o-y (132 deals in October 2021).
October 2022 recorded six large deals (deals of value greater than US$100 million) aggregating US$2.2 billion, a sharp drop from the 24 large deals worth US$11.3 billion recorded in October 2021. By deal type, growth investments were the highest in terms of value in October 2022 at US$2 billion across 13 deals, which includes the ~US$1 billion investment in CitiusTech by Bain Capital.
The ~US$1 billion CitiusTech deal between Bain Capital and BPEA EQT helped prop up PE/VC exits in October 2022 to US$1.6 billion. However, on a y-o-y basis, exits were lower by 69%. Exits via secondary sale were the highest in October 2022, with four exits worth US$1.4 billion on the back of the large CitiusTech deal.
From a sector point of view, healthcare was the top sector in October 2022, with US$977 million in PE/VC investments across three deals. The second largest sector was financial services, with US$216 million recorded across 13 deals. Traditionally favourite sectors like technology and e-commerce recorded ~90% y-o-y decline in PE/VC investments.
Inflation woes, recession fears, the rising cost of capital and elevated levels of uncertainty driven by geopolitical tensions have weighed down the PE/VC activity in 2022, globally as well as locally. In India, the investment momentum, both in terms of size and number of deals, has slowed down considerably. Not surprisingly, 2022 has, so far, been the best year for credit investments, recording US$3.5 billion in PE/VC investments. Many investors are now focusing on value plays, a marked shift from last year when growth was the primary focus. While many startups have already embarked on the path of conserving cash, growth rates are expected to be negatively impacted. We are projecting an uptick in consolidation / M&A within the startup space in the coming months. On the PE side, valuations or the bid/ask spreads continue to be the main factor slowing down deal closure activity. Over the next 3-4 months, we expect this situation to improve as sellers and investors alike find equilibrium. The Indian economy continues to outperform relative to other emerging markets and while there maybe short-term volatility, the PE/VC community continues to be sanguine about India's long-term growth prospects."
Investments
PE/VC investments in October 2022 recorded US$3.3 billion, 75% lower than PE/VC investments in October 2021 (US$13.1 billion) which had recorded the highest-ever monthly investments on the back of large deals. Nonetheless, October 2022 recorded a 60% increase in investments on a sequential basis due to the large Bain Capital-CitiusTech deal. In terms of the number of deals, October 2022 recorded 75 deals, a 43% decline y-o-y (132 deals in October 2021) and at par with deals in September 2022.
October 2022 recorded six large deals (deals of value greater than US$100 million) aggregating US$2.2 billion, a sharp drop from the 24 large deals worth US$11.3 billion recorded in October 2021. The previous month had recorded just four large deals worth US$906 million. The largest deal in October 2022 saw Bain Capital invest ~US$960 million in CitiusTech for a 40% stake.
By deal type, growth investments were the highest in terms of value in October 2022 at US$2 billion across 13 deals compared to US$1.7 billion invested across 13 deals in October 2021 and US$502 million invested across 16 deals in September 2022. Startup investments recorded US$583 million across 46 deals in October 2022 compared to US$4 billion recorded across 100 deals in October 2021 and US$938 million invested across 43 deals in September 2022. Buyouts recorded US$472 million across four deals in October 2022 compared to US$6 billion across six deals in October 2021 and US$81 million across three deals in September 2022.
From a sector point of view, healthcare was the top sector in October 2022, with US$977 million in PE/VC investments across three deals (US$245 million across six deals in October 2021). The second largest sector was financial services, with US$216 million recorded across 13 deals (US$2 billion across 30 deals in October 2021). Traditionally favourite sectors like technology and e-commerce recorded US$157 million (US$5.6 billion in October 2021) and US$128 million (US$1 billion in October 2021), respectively, a significant decline in values compared to October 2021.
Spotlight: PE/VC credit investment deal trends
Globally, investors are diversifying their portfolios and seeking better returns by increasing capital allocations from traditional asset classes toward alternative asset classes. Private credit now accounts for about 12% of global private capital assets under management.
2022 has emerged as India's best year for PE/VC credit investments, recording US$3.2 billion.
Credit investments in 2022 to date are ~5% higher than the previous high recorded in 2019.
Four sectors — financial services, real estate, infrastructure and e-commerce, have accounted for almost 80% of all credit investments between 2017 and 2022 (Jan-Oct).
Amid rising interest rates and valuations continuing to remain high, credit has emerged as a good opportunity for PE/VC investors to capture value, with many companies looking to raise bridge funding as an alternative to raising equity at less-than-optimal valuation levels.
IFC, Piramal, and KKR were among the largest credit investors from 2017 to 2022, investing over US$1 billion each. In addition, Varde Partners, Apollo, Ares SSG and Bain Capital Credit are also emerging as major players in the Indian credit markets.
In terms of the number of deals, Trifecta, Blacksoil, IFC, Alteria and Innoven were the top players in the credit market.
Apollo's US$750 million investment in Mumbai Airport and Fidelity, Citadel Capital Management and Varde Partners' US$660 million investment in OYO were among the largest credit deals from 2017 to 2022.
India offers a large structural opportunity for private credit investors. Post a spate of bad loans, traditional lenders have become risk averse while NBFCs are recovering from a liquidity crisis that engulfed them in 2018. This has left a void for private credit providers to capture.
Credit enforcement, bolstered by the introduction of the creditor-friendly "Insolvency and Bankruptcy Code, 2016" supported by dedicated tribunals, has provided private credit with a great start in India. A series of economic and administrative reforms working towards a more business-friendly environment, coupled with the push for growth, provide the ideal platform for private credit to grow to its potential.
Stressed asset investment opportunities (emanating from the existing stock of unresolved NPAs and fresh credit defaults) and special situation opportunities could be worth around US$25 billion over the next five years, according to an EY report[1].
As a result, India is witnessing growing interest from global multi-strategy PE firms in the credit and special situation spaces. With the Indian PE/VC market maturing, we could see bigger plays in the Indian credit market by global funds.
Exits
October 2022 recorded 15 exits worth US$1.6 billion compared to US$5.2 billion in October 2021 across 25 deals and US$653 million recorded across 24 deals in September 2022. October 2021 recorded two large secondary exits worth ~US$5 billion — the US$3 billion Hexaware deal between Carlyle and Baring PE Asia and the US$1.9 billion VFS Global deal between EQT and Blackstone.
Exits via secondary sale were the highest in October 2022, with four exits worth US$1.4 billion, propped up by the large secondary deal which saw Bain Capital purchase a 40% stake in CitiusTech for US$960 million from BPEA EQT which was also the largest exit in this month and the fourth largest this year.
Fundraise
October 2022 recorded total fundraises of US$2.2 billion, compared to US$70 million raised in October 2021. The largest fundraise was by Motilal Oswal, which raised its fourth fund of US$549 million, all raised from domestic high net worth individuals (HNIs) and family offices.
[1]. How private credit is evolving in India
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