Global headwinds slow down PE/VC flows by 25% in 2023, conflicts may hit cross-border deals

Even as India's growth dynamics propel the world's 5 largest economy to the radar screen of global investors, it's a different story on the home turf with private equity/venture capital (PE/ VC) investments which have witnessed a year-on-year decline of 25 per cent in 2023 till date, underlined by the decline in PE/VC investments in October 2023 at $3.4 billion which is 3 per cent lower than October 2022, finds a report by Ernst & Young and Indian Private Equity & Venture Capital Association (IVCA).

- NIVEDITA MUKHERJEE

Although the Indian consumption story continues to remain strong, the increase in uncertainty on account of global factors and impending state and central elections in India seem to be slowing down progress in deal pipeline activity. While there have been no large, billion-dollar-plus deals in the past 2 months, the IVCA-EY report suggests that a few deals which are in play, if delayed, could lead to a down year for PE/VC investments, specifically in the pure play PE segment. "We remain cautiously optimistic," says the IVCA-EY report.

The October Dealtracker by Grant Thornton Bharat also factors in the geopolitical impact in its assessment of PE/VC deals and investments. October 2023, says the report, recorded 122 deals valued at $2.2 billion, which was the third-highest monthly deal volumes in 2023 but second-lowest in terms of deal values, due to absence of big-ticket transactions. Last month also marked the lowest M&A activity for the year, with only 21 deals valued at $235 million. In contrast, PE activity, accounting for 101 deals worth $1.9 billion, faired better, the Grant Thornton analysis says. Shanthi Vijetha Partner, Grant Thornton Bharat expresses concern over the Russia-Ukraine war in 2022 being followed by the Israel-Hamas conflict, potentially leading to challenges such as rising interest rates, geopolitical instability and a possible slowdown or recession. "These will eventually result in tightened investor pockets and decline in crossborder deals," says Vijetha.