Indian private equity (PE) investments reached $70 billion in 2021 in more than 2,000 deals -- an 87 per cent increase over the volumes in 2022, a new report showed on Thursday.
Indian investments grew by 96 per cent over 2020 (excluding the mega deals of Jio Platforms and Reliance Retail).
Much of the deal activity was in consumer tech and IT/ITES sectors.
The two sectors combined represented more than 60 per cent of the year's deal value, at nearly $44 billion, according to the annual India Private Equity Report 2022 by Bain & Company.
The number of large cheque size investments also witnessed a significant increase and the year saw 11 investments worth greater than $1 billion with Flipkart, Hexaware and Mphasis being among the largest deals, compared to six in 2020.
However, after an exuberant year for both deal activity and exits, 2022 is expected to witness a tapering in the pace of activity as the gains of 2020 are consolidated, according to the report, prepared in collaboration with Indian Venture and Alternate Capital Association.
"In 2021, the Indian private equity ecosystem bounced back from 2020's Covid-driven restraints, growing faster than most major economies, including China, with 96 per cent growth over 2020." said Arpan Sheth, Partner, Bain & Company and co-author of the report.
"This year, we anticipate a significant tempering of pace in investment activity as macro and micro trends converge, but see this as an opportunity for the consolidation of last year's gains, which should make India witness annual PE-VC deal values of around $50 billion more frequently," Sheth added.
IT/ITES saw investments of $14.2 billion in 2021, growing by $10.3 billion or 255 per cent as compared to 2020.
"Indian IT is increasingly courting billion-dollar-plus deals, and the deal size and count is expanding with significant deals taking place in the sector in the last few years," said Sriwatsan Krishnan, Partner, Bain & Company and co-author of the report.
"While the valuations are tempering, deals in 2022 indicate that the sector will continue to get PE attention as Indian IT firms continue to demonstrate excellence," Krishnan added.
IT has accounted for nearly 40 per cent of buyout deal value, and nearly 20 per cent of buyout deal volumes over the last three years.
In the most celebrated milestone for the year, exits worth more than $36 billion were unlocked in 2021, quadrupling fund exits over 2020's $9 billion.
Strategic sale continued to be the most dominant route of exit, with nearly 50 per cent of all exits over the last few years, the report said.