PE-VC deals surpass $24 bn in May: Bain & Co

Despite a slowdown in investment activity, over $24 billion ( ₹1.87 trillion) of private equity and venture capital money has flowed into Indian startups so far in 2022. According to Bain and Co., nearly 630 deals were struck in January-May compared to 775 deals worth $19 billion ( ₹1.45 trillion) in the year-ago period.

The Indian startup ecosystem is going through a period of sharp correction in valuations. “Funds are shifting strategy to adapt to the changes by expanding their cheque sizes, investing in deeper target relationships, and increasing value-creation capabilities, especially by setting up portfolio teams,” said the report by Bain and Indian Venture and Alternate Capital Association.

According to the India Private Equity Report 2022, amid macro stresses of inflation, geopolitical uncertainties and supply chain disruptions, the funding outlook for 2022 is expected to be sobering, after an exuberant year for deal activity and exits in 2021.

“Funding has become expensive and there could be some dip in valuations and we may see down rounds too…this could lead to lower fundraise or structure it differently as it can affect the image of companies. While it is hard to predict whether it will necessarily happen, but funding rounds are getting delayed or cancelled,” Naman Bansal, associate partner, and member private equity practice, Bain, said.

Traditional funds are increasingly seeking buyout opportunities, with Blackstone, Baring, Carlyle, Advent, GIC, and KKR investing over $1 billion each in buyouts in the last three years.

“Buyouts are attractive considering that they give funds more control over value creation for high-value deals via operational turnarounds and deep sectoral focus. We expect to see more such differentiated fund strategies as India’s market attracts more investors,” the report added.