Venture capital and private equity investments in India: An exploratory study on the shifts in sectoral focus from 2000-2017

Abstract

The venture capital and private equity (VCPE) industry in India has seen significant growth in recent years. Huge demand, good macroeconomic fundamentals and support from the government and financial regulators is contributing to the fast-paced development of the sector. There has been huge investment in the Indian ecommerce market. Startups continue to be the dominant sector for PE/VC investments in terms of deal values. Banking and financial services, real estate, pharma and healthcare and energy and natural resources also continue to remain as focus areas. Significant changes have been happening in this sector with shifting trends in sectoral investments as well as exit strategies. 2017 was a watershed year for PE/VC investments with record high investments as well as exits. Focus of PE/VC firms seems to be shifting back to technology led companies. Fintech has also been attracting lot of interest. Significant exits happened in Consumer Technology, BFSI and Telecom sector but investments in these sectors were lower. Private equities, after a few years of low interest, are again focussing on retail real estate in order to diversify their portfolios. New asset classes like alternative investment funds (AIFs) and distressed asset management are gaining momentum in the Indian market after the enactment of Insolvency and Bankruptcy Code in 2016. The objective of this study is to understand the shifting trends in Venture Capital and Private Equity Investments in India and explain the reasons for the shift in sectoral focus across time. The study also aims to understand whether there exists any relationship between the growth rate of a particular sector and the number of VC/PE happening in that sector.