The exceptional performance of the secondary market in 2023 provided private equity (PE) and venture capital (VC) firms with unprecedented opportunities for profitable exits, driven largely by consistent inflows from domestic institutional investors.

According to Nuvama Institutional Equities, the past year witnessed historic PE/VC exits through the secondary market in India. Data compiled by the brokerage revealed that 78 companies experienced PE/VC exits amounting to a staggering Rs 97,500 crore, with notable exits from Paytm (Rs 12,900 crore), Coforge (Rs 10,900 crore), Mankind (Rs 8,800 crore), Axis Bank (Rs 5,900 crore), and Sona BLW (Rs 4,900 crore).

Major investors such as Alibaba, Berkshire Hathaway, and SoftBank Corp were involved in the exit from Paytm, while Coforge saw Baring Asia as a significant exiting investor. Mankind Pharma, which was listed on the stock exchanges in May 2023, had Chrys Capital and Capital International among its exiting investors.

These exits coincided with the ongoing bullish trend in the domestic equity markets, where the BSE Sensex gained nearly 19% in 2023. The BSE SmallCap and BSE MidCap indices witnessed even more substantial rallies, increasing by 48% and 46%, respectively.

The midcap and small-cap segments played a pivotal role in delivering lucrative exits for investors, constituting 80% of deals in 2023. In terms of market capitalization distribution, midcap exits accounted for approximately Rs 48,700 crore (50%), small-cap exits for Rs 29,700 crore (30%), and large-cap exits for Rs 19,200 crore (20%), as highlighted in a report by Nuvama Institutional Equities.

Sector-wise, the most notable exits occurred in financials (Rs 43,500 crore), consumer discretionary (Rs 17,800 crore), IT (Rs 12,400 crore), healthcare (Rs 11,600 crore), and industrials (Rs 10,000 crore).

Overall, foreign-backed funds withdrew Rs 81,200 crore, while India-dedicated funds accounted for Rs 16,300 crore. This marks a significant increase compared to the previous record exit of Rs 91,700 crore by PE/VCs in 2021.

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