Legacy Firms Secure 75% of PE-VC Funds in 2023, Outpacing Start-Ups

In 2023, 75% of PE-VC investments favored traditional sectors like manufacturing, energy, healthcare, and retail, up from 60% in 2022, with Reliance Retail excelling. India's PE-VC share rose as China's declined.

Bhakti Kothari
New Update

Legacy companies beat new-age ventures including start-ups last year when it came to bagging private equity and venture capital (PE-VC) investments, according to a report released by the US-based management consulting firm Bain & Co.

The report said as much as 75 per cent of PE-VC investments in 2023 revealed a slant towards traditional sectors, particularly across industries such as advanced manufacturing, energy, healthcare and retail. In 2022, PE-VC investments in these areas stood at around 60 per cent.

Reliance retail division was among legacy companies that performed exceptionally in 2023, with private equity funds boosting volume of trade that concentrated on the average buyer. Another conventional sector that witnessed robust growth last year was healthcare, scaling $5.5 billion to set a record, said the Bain & Co. report that appeared in the Times of India website on Thursday.

Over the years, though, private equity investors have also cautiously started considering the scope of funding new-age firms. Indian startup companies such as the cosmetics brand Sugar and the fantasy sport platform Dream11 are among GenNow ventures that have garnered interest of American private equity companies such as L Catterton and TPG Inc.

India’s share of PE-VC investment among Asia-Pacific nations has grown at an even pace over the past five years. In comparison, China has been seeing a slump, from 55 per cent in 2018 to 31 per cent in 2023.

“Favourable policies in India such as production-linked incentives, export promotion initiatives, and customs duty rationalisation drove some shift in economic activity and subsequent investments to India,” the report said, adding that “global firms diversified production outside China”.

Overall, PE-VC investment saw a downslide in 2023. Although venture capital funding shot up, the total PE-VC funding saw slowed down last year. While the figure stood at $62 billion in 2022, it came down to $39 billion in 2023.