Private equity (PE) and venture capital (VC) investments registered a 60 per cent year-on-year growth in the July-September quarter to touch $13.6 billion, according to the latest EY-IVCA monthly PE/VC roundup. 

In the third quarter of this year, there was a significant increase in investments, reaching $13.6 billion in 209 deals. This represents a 60 per cent rise compared to the same period in 2022. However, when comparing it to the previous quarter (April-June), the total value of deals was slightly lower, down by 5 per cent. Additionally, the number of deals in the July-September quarter was 18 per cent lower compared to the same period last year. 

"A pickup in pure-pay PE/VC investments of around 88 per cent bolstered the growth in total PE/VC investments in 3Q2023, which recorded 31 large deals aggregating $10.7 billion compared to 15 large deals worth $4.8 billion in 3Q2022," Vivek Soni, partner and national Leader, Private Equity Services at EY India, said. 

According to the report, since 2018, the life sciences sector has attracted a significant sum of  $22.1 billion in PE/VC investments, almost equally divided between pharmaceutical and healthcare. 

The early years primarily saw growth driven by pharmaceutical investments. However, post-pandemic, healthcare investments have taken the lead, it said. 

Growth investments were the highest in 3Q2023 at $4.5 billion followed by buyouts at $3.5 billion. From a sector point of view, infrastructure was the top sector in 3Q2023 recording $3.9 billion on the back of investments in the renewable energy sector. 

"The Indian macro, while showing strong signals in terms of new highs in Index of Industrial Production, GST collections, advance tax collections, and heightened consumer confidence as we get into the festive season, is increasingly being counter-weighted by a deteriorating global macro, driven largely by recessionary fears in the US and Europe," Soni said. 

Any sustained spike in crude oil prices will have a detrimental impact on inflation around the world in general and the Indian economy in particular. All these downside risks need to be evaluated as the Indian PE/VC sector continues its fragile recovery, he added. 

The start-up sector continues to struggle, with year-to-date investments in start-ups at a seven-year low. While there is a funding winter for primary investments in start-ups, it is not indicative of inactivity on the part of PE/VC funds, as secondary deals are at an all-time high of $5.2 billion. 

Likewise, PIPE investments in 2023 are at an all-time high of $7.5 billion. The buoyant equity markets have allowed a revival in the PE-backed IPO market which is adding to the improving investment sentiment. 

"Looking at the strong deal pipeline, notwithstanding the increasingly uncertain global macro, we remain hopeful that Indian PE/VC investments in 2023 will surpass 2022 levels," he noted. 

Exits were recorded at  $8.6 billion across 85 deals in 3Q2023. The growth in exits was across all deal segments, with IPOs recording the highest growth year-on-year, followed by secondary and strategic exits.