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India-focused PE and VC funds raised record $8.5bn in 2022

A total of 70 India-focused private equity and venture capital funds closed in 2022, raising an aggregate $8.5bn in the process, is the highest ever annual fundraising value for the industry, according to a new report from Preqin.

The Private Equity and Venture Capital in India 2023: Preqin Territory Guide report, produced in association with the Indian Venture and Alternate Capital Association (IVCA), reveals that despite the record fundraising, there was a sharp decline in activity last year, primarily due to growing global macroeconomic challenges. As a result, aggregate deal value saw a sharp drop of 42% from a record $60bn in 2021 to $35bn in 2022.

Defensive sectors such as healthcare and energy and utilities have shown growth in India, attracting investment attention away from traditionally popular sectors like IT, which experienced a sharp decline, plummeting from an aggregate value of $26.3bn in 2021 to $8.3bn in 2022. This slowdown has continued in 2023, with IT deal value shrinking to $1.7bn in the first seven months of the year.

According to the report, as private equity and VC players in India navigate uncertain market times, there has been a fundamental shift in their investment approach, and they are increasingly focusing on fewer, higher-quality assets and driving value creation within their portfolios. Preqin says this is healthy for the ecosystem and will likely lead to the creation of robust businesses that can stand the test of time.

The annual number of funds closing has more than tripled over the last decade. GPs in India are also raising and closing larger funds, with the average fund size almost doubling from $72.3m in 2013 to $121.4 in 2022.

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