PE/VC investments flow, exit volumes declined drastically in July 2022: IVCA-EY report

‘The scenario may increase disparity between the haves and have nots’

Bengaluru

Private equity and venture capital investments into the country crossed $3 billion In July 2022, 69% lower than the investment volumes in July 2021, reported IVCA-EY.

The month also witnessed a 70% decline in exits to $322 million, the lowest since January 2021, according to the report.

Vivek Soni, Partner and National Leader, Private Equity Services, EY said, “After remaining resilient for almost six months amid global headwinds of tightening liquidity and rising inflation, Indian PE/VC investment flows, for the first time, have shown some tepidness.”

Deals were taking longer to close as investors ask tough questions and take their time to process their deal underwriting thesis, he added.

According to the IVCA-EY report, “with the U.S. staring at a recession and further tightening by the Fed and the RBI predicted, the easy monetary and fiscal policy era was behind us.”

Furthermore, with the continuing geo-political conflict putting additional strain on weakened European economies and the rising tensions in the South China sea area, the global economy is more vulnerable than ever before, it noted.

“While India has remained fairly resilient, it is feeling some pressure due to the falling rupee and rise in inflation. This rising cost of capital is causing more VC funds to emphasis on positive unit economics and curtailed cash burn rates while making investment decisions,” Mr. Soni explained.

This may increase disparity between the ‘haves’ and ‘have nots’ and drive consolidation across sectors, with well-funded category leaders buying out those with shorter runways, he said.