PE inflows plunge 42% to $23.3 bn in 2022: Report

Private equity investments into domestic companies fell sharply year-on-year by 42% to $23.3 billion in 2022, which is the lowest since 2019, when it was $15.8 billion, according to an industry report.

The numbers reflect the overall funding winter that the startup space in particular, and the overall foreign investments in general have been witnessing since the Ukraine war began last February.

Private equity investment inflows into the country fell by a sharp 42% in 2022 from last year to $23.3 billion -- the lowest annual inflows since 2019 when it was a low $15.8 billion, but still relatively elevated compared to historical levels, said Elaine Tan, a senior analyst at Refinitiv, the LSEG business arm that provides financial markets data and insights.

This report did not say how many deals were closed in the year.

In the December quarter, the PE investments totalled $3.61 billion, down 8.1% sequentially from $3.93 billion and fell 67.2% annually when it was $11.06 billion, according to the report.

The total number of deals in Q4 fell 24.8% to 333 from 443 in Q3 and by 19% from Q4 of 2021 when the transactions stood at 411, according to the report.

Tan attributed the sharp decline to the ongoing geopolitical tension, rising interest rates and recession fears in the Western economies, which all made global investors cautious in making investments.

Internet-specific, computer software and transportation have attracted the majority of the funding, accounting for 66% of the total during the year at $8.58 billion.

The Internet-specific sector has seen a 57.4% decline in fund inflows, while the number of deals declined to 528 in 2022 from 556 in 2021.

Computer software companies saw funding tap declining to the tune of 46.4%, financial services (down 34.6%), as well as medical and health saw the same falling by 26.4% from 2021 levels.

However, industries catering to transportation saw inflows nearly doubling with a 93% jump, communications soared by 225.6%, and agri/forestry/fish jumped by 215.8% in terms of fund inflows.

Tan expects this trend to continue as investors diversify away from China amid increased uncertainty, and India and Southeast Asia may benefit from this shift.

Of the total, domestic PE funds raised $13.7 billion in 2022, up 163.2% over 2021 when it was only $5.21 billion. This pushes the substantial capital waiting to be deployed as India-based PE fundraising activity totalled $32 billion -- from 2019 to 2022.

The deal street was topped by Think & Learn and VerSe Innovation which received $800 million each from PEs in the year, followed by Bharti Airtel and Bundl Technologies which got $700 million each, Tata Motors Electric Mobility ($494.7 million), Reliance Retail ($343.5 million), NTEX Transportation Services ($330 million), Delhivery ($304 million) and Busybees Logistics Solutions and Renkube received $300 million each.