Market volatility drives PE investments down 30.7% in first 3 months this year: Refinitiv

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If 2021 was a year of great rally for private equity firms on the back of a booming primary market, then 2022 has so far seen a subdued activity on the PE front, staggered by a volatile market and rising uncertainties.

The secondary market was flushed with abundant liquidity that fuelled tremendous growth for the PE firms, taking them to their all-time highs in 2021. The start-ups and new-age companies, in order to take advantage of the buoyancy in the secondary market, made a beeline to go listed.

The private equity and venture capital firms made a killing on their investments as most IPOs of last year witnessed bumper listings.

“Last year, the buoyant secondary markets and record primary listings in India have driven confidence in the IPO markets, providing a conducive environment for companies to go public and provide a positive element for start-ups and investors to consider IPO as a viable exit strategy,” a report from Refinitiv said.

“The momentum was driven by several significant factors, including historically low interest rate environment, digital acceleration, and transformation, and increasing depth in start-up ecosystem,” said Elaine Tan, Senior Analyst at Refinitiv, one of the world’s largest providers of financial markets data and insights.

This time, a tightened scrutiny on Indian IPOs and market volatility brought by international conflicts dampened and fuelled headwinds for IPOs.

The data shared by Refinitiv shows that the number of deals in the first quarter of the calendar year 2022 declined from 410 to 387 and so did the amount of equity investments compared to fourth quarter of 2021. The amount of private equity investments declined by 30.7 percent - from $ 11.5 billion in Q4CY21 to $8 billion in Q1CY22.

However, when compared to the corresponding period last year, the period in review witnessed a robust jump of 35.3 percent in the number of deals from 286. Consequently, the amount of private equity investment was 88.6 percent higher from $ 4.2 billion in Q1CY21.

“There is also substantial capital waiting to be deployed as India-based PE funds raised $4.4 billion so far this year, more than double the amount raised from the first quarter of last year, pushing fundraising to more than $21 billion from 2019 to first quarter of this year," Tan said.

The funds located in India recorded 256.9 percent leap from to $1.23 billion raised in Q4CY21. However, the number of companies which received the investments went down from 71 to 28 which is a decline of 60.6 percent over the previous quarter. A year back, the number stood at 104.

The data shows that Internet Specific and Computer Software businesses attracted the highest number of investments while other businesses lagged far behind.

Internet Specific industry segment received the highest amount of private equity investment at $3.6 billion in Q1CY22, a growth of 125.3 percent from a year ago when it was $1.6 billion.

The investments in Computer Software segment stood at $2.4 billion, a growth of 64.7 percent over $ 1.5 billion received during the same period a year ago.

Transportation segment was a distant third in receiving the private equity investments as it managed $0.8 billion worth of investments, a growth of 2,432.5 percent over $0.3 billion invested in Q1CY21. Things were not good for sectors like financial services, medical/health and biotechnology which witnessed a decline in equity investment compared to the same period a year ago.

In terms of company specifics, the computer software company, Think & Learn Pvt Ltd managed the highest investment as it moped up $0.8 billion. The internet specific company, Bundl Technologies Pvt Ltd, came in second with the investments of $0.7 billion while the transportation company Tata Motors Electric Mobility was able to raise $0.5 billion.

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