Indian PE-VC Investments Hit $39bn, Boosted By Manufacturing, EVs In 2023

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The EV market is anticipated to see strong deal activity, especially among OEMs planning capacity expansions or new product launches, as well as in the charging infrastructure sector. This includes battery-swapping companies aiming to broaden their geographic reach or enter new EV markets.

In 2023, private equity and venture capital (PE-VC) investments in India reached around USD 39 billion, returning to pre-pandemic levels, as detailed in Bain & Company’s ‘India Private Equity Report 2024’. This report was produced in partnership with the Indian Venture and Alternate Capital Association (IVCA). Last year, investment favoured traditional industries such as manufacturing, healthcare, and energy, which made up about 75% of total investments, an increase from 60% in 2022. The manufacturing sector alone attracted about USD 2 billion, achieving a compound annual growth rate (CAGR) of approximately 20% over two years, spurred by diversified supply chains, government incentives, and the availability of large-scale assets.

The electric vehicle (EV) sector is poised for significant growth, with a projected 40% market penetration by 2030. Key transactions occurred in major firms like Ola Electric, Ather Energy, Mahindra EV, and TI Clean Mobility, with major original equipment manufacturers (OEMs) accounting for over 70% of last year’s deal value.

Gustaf Ericson, Associate Partner at Bain & Company, commented that advanced manufacturing is likely to see increased deal activity soon, driven by the China+1 strategy, Production-Linked Incentives (PLI), and emerging scaled assets. He expects sectors such as electronic manufacturing services, packaging, and EVs to thrive due to these favourable conditions.

Despite a less optimistic global outlook for 2024, the PE-VC investment scene in India should remain robust, particularly in advanced manufacturing due to strong fundamentals and government support. The EV sector is also anticipated to see dynamic deal activity, especially among OEMs focusing on expanding capacity or launching new products, and in the EV charging infrastructure, including companies that are expanding geographically or entering new segments.

The packaging industry is expected to grow at a CAGR of about 10% from 2023 to 2027, driven by higher demand from the food and beverage sector and a shift towards more sustainable options. Electronics production is forecasted to grow at a 25% CAGR from 2023 to 2027, fueled by the expansion in mobile phones, IT hardware, and consumer electronics.

Additionally, the diversification of global supply chains is likely to benefit Indian manufacturers, especially in export-heavy sectors like electronics, pharmaceuticals, and chemicals, supported by strong government incentives.

Over the past three years, India-focused funds have diversified into new sectors, with major investors such as Temasek, GIC, ADIA, and Brookfield broadening their portfolios. In 2023, India recorded USD 29.6 billion in private equity investments, an 18% decline from the 2022 peak of USD 36 billion, with PE investments representing about 75% of the total PE-VC deal value. This trend highlights a focus on acquiring high-quality assets amid a significant drop in venture capital investments, which fell to USD 9.6 billion in 2023 from USD 25.7 billion in 2022.

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