Manufacturing and EV sectors drive Indian PE-VC investment to $39 billion in 2023, ET EnergyWorld

New Delhi: According to Bain & Company’s annual ‘India Private Equity Report 2024’, total private equity and venture capital (PE-VC) investments in India were around $39 billion in 2023, matching investment levels seen before the Covid-19 pandemic , released in association with the Indian Venture and Alternate Capital Association (IVCA). There has been a noticeable shift in the distribution of investments in 2023, with traditional sectors such as manufacturing, healthcare and energy accounting for around 75% of all investments, compared to around 60% in 2022.

The report highlighted that India’s manufacturing sector has attracted investments worth around USD 2 billion, with a compound annual growth rate (CAGR) of around 20 per cent over the last two years. The sector’s growth is being driven by several factors, including the diversification of supply chains, government incentives and the availability of a range of large-scale assets on the market.

Significant investment has been made in the electric vehicle (EV) sector, which is expected to have a penetration rate of 40 percent by 2030. Major original equipment manufacturers (OEMs) accounted for more than 70 percent of deal value last year, including significant deals in companies such as Ola Electric, Ather Energy, Mahindra EV and TI Clean Mobility.

Gustaf Ericson, associate partner at Bain & Company, said: “The advanced manufacturing sector is expected to see deal growth in the near to medium term, driven by China +1 tailwinds, government incentives such as PLI, and the emergence of scaled assets throughout the country. We anticipate that electronics, packaging and electric vehicle manufacturing services providers will greatly benefit from this favorable environment in the coming years.

Despite the weak global outlook for 2024, the PE-VC deal landscape in India is expected to remain moderate, with traditional sectors, particularly advanced manufacturing, likely to attract significant investment on the back of solid fundamentals and supportive government policies.

The electric vehicle market is also expected to see strong transaction activity, particularly among OEMs looking to expand capacity or introduce new products, and in charging infrastructure, including battery replacement players looking to expand their geographic footprint or enter new segments of electric vehicles.

The packaging sector is expected to grow at a CAGR of around 10% over 2023-27, driven by growing demand from the food and beverage industry and the shift to more sustainable packaging options. Electronics manufacturing in India is forecast to grow at a CAGR of 25% during 2023-2027, driven by growth in sub-segments such as mobile phones, IT equipment and consumer electronics.

Moreover, the diversification of the global supply chain is expected to benefit Indian manufacturers, especially in export-oriented sectors such as electronics, pharmaceuticals and chemicals, where India boasts globally competitive players supported by robust government incentives.

As India-focused funds increasingly diversify their portfolios, many leading funds, including Temasek, GIC, ADIA and Brookfield, have expanded into new sectors over the past three years. In 2023, private equity investments in India totaled $29.6 billion, down 18% from the 2022 high of $36 billion, with PE investments accounting for approximately 75% of total deal value PE-VC. This trend reflects the continued emphasis on securing high-quality assets despite a significant reduction in venture capital investment, which fell to $9.6 billion in 2023 from $25.7 billion in 2022.