According to reports, private equity investments reached a record high of USD 40.1 billion in 2021, up over 15% from the previous year, fueled by a USD 3.6 billion infusion into Flipkart and USD 1.93 billion into Bundl Technologies.
While the amount of inflows increased 15.2 percent from USD 34.8 billion in 2020 to USD 40.1 billion in 2021, the transaction volume increased to 990 in the reporting year from 588 in 2020, according to statistics compiled by Refinitiv, a LSEG entity.
The inflow pace is expected to continue in 2022, according to the agency’s analysts, as technology businesses, particularly startups, continue to seek money from both private and public markets.
They also predict healthcare, financial services, consumer-related, and education sectors, which are ripe for digitisation and remained robust throughout the epidemic, will continue to draw investors beyond 2022, as large sums of money await deployment by India-focused funds.
Other factors driving up trust in the capital market, creating a suitable atmosphere for firms to go public, and giving investors a feasible exit, they added, were robust secondary markets and record primary listings in 2021.
PE interest in internet-related enterprises peaked in 2021, with total investments reaching USD 20.74 billion, up from USD 7.6 million in 2020. PE interest in internet-related enterprises peaked in 2021, with total investments reaching USD 20.74 billion, up from USD 7.6 million in 2020. Meanwhile, capital raising by India-focused private equity firms reached USD 4.72 billion, up 5% from USD 4.5 billion in 2020.
Private equity: a burgeoning sector
The sustained high growth in private equity financing has expanded the quantity of inventory available for sale in the secondary market and made this an increasingly well-understood asset class. In addition to typical private equity shares, this inventory is growing more diverse as investments in real estate, infrastructure, and private debt funds are being offered in the secondary market.
The universe of sellers and purchasers in the secondary market is expanding in tandem with the development and variety of goods available for sale. To actively manage their private equity portfolios, pension funds and sovereign wealth funds, for example, are increasingly turning to secondary markets.
The rise of GP-led secondaries has aided the market’s expansion. The degree of friction in the secondary sale process is decreasing, and the quantity of information accessible to purchasers of fund interests is growing, as more general partners actively give liquidity choices to their limited partners.
The private equity market is positioned to continue its tremendous expansion as more firms remain private for longer periods of time. By providing investors with a way to access liquidity in an otherwise illiquid market, the private equity secondary market will continue to gain and will be a crucial contributor to this expansion.
Frequently Asked Questions (FAQs)
Q1. What is the purpose of a private equity firm?
A private-equity business is an investment management organisation that provides financial support and invests in the private equity of startup or running firms using a number of loosely related investment methods such as leveraged buyout, venture capital, and growth capital.
Q2. Where does private equity invest its finances?
Private equity companies often invest in equity stakes with a four- to seven-year exit strategy. Management, private equity firms, subordinated debt holders, and investment banks are all sources of equity capital. The equity portion is usually made up of a mixture of all of these sources.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.