PE investment hits $30.89 bn, up 22.7%

Private equity (PE) activity in India between January and November 2024 recorded a total value of $30.89 billion across 1,022 deals, a 22.7 per cent increase in value and an 18.4 per cent rise in deal count compared to $25.17 billion across 863 deals during the same period in 2023.

Notable large deals during the period include Walton Street India Investment Advisors at $1.5 billion, and KiranaKart Technologies at $1.35 billion.

According to experts, 2024 witnessed a plateau in deal-making while the industry made strides in utilising public markets for exits.

“Ongoing 2024 is the year in which exits from IPOs became mainstream for the Indian private equity industry,” said Gopal Jain, managing partner, Gaja Capital.

He highlighted that exits through public markets were not limited to minority stakes but extended to control positions.

Gaurav Sharma, head, India Investment Business, Investcorp, shared the sentiment emphasising the importance of exits for investor confidence.

“It is a very good sign for private equity in India because exits have always been a concern for LPs (limited partners) when they're looking at private equity investing in India, and the record numbers for exits that happened in 2024 bodes extremely well for PE as an asset class in the country,” he said.

Indian private equity is undergoing a shift as domestic capital is beginning to gain more traction, marking a new era for the industry.

“Private equity is no longer about how foreign investors look at India.

"Increasingly, it is an Indian product and the capital that is being invested through private equity is Indian capital,” said Jain.

Despite the local capital, global macroeconomic conditions continue to influence the sector.

“If you're a foreign fund, geopolitics, what happens in the US, has a huge impact because most of the capital that is being invested in India is coming from there,” said Vivek Soni, partner, Ernst & Young (EY).

The funding winter, particularly for late-stage startups, persists.

“Funding winter is not there if you are a profitable company, looking to grow and you need capital.

"But if you are a business that has been losing money for a while, whose cash flow is negative, and there is no clear visibility to keep it positive, then funding winter remains,” said Sharma.

“The winter is becoming slightly warmer, but it's still there,” said Soni, adding that the bid-ask spread in valuations is slowing deal closures.

Profitability has gained renewed focus among startups and PE-backed companies.

“Many entrepreneurs have taken the last two or three years to find a greater balance between revenues and profits,” Jain noted, dismissing the term “funding winter”.

LeapFrog Investments, an impact-focused PE firm, highlighted the growing prominence of India in its portfolio.

“India is our largest market. About a third of the capital gets deployed in India,” said Pranav Kumar, partner at LeapFrog.

He cited the nation’s favourable demographics, under-penetrated financial and healthcare sectors, and the government’s digital public infrastructure as key enablers for growth.

The PE sector’s focus remains on core themes such as financial services, healthcare, and technology.

“India has a lot of potential. It’s not a five-year story, it’s hopefully a 25-year story," said Kumar.

With an average ticket size of $30-$50 million per deal and four investments in 2024, the PE firm expects to have a similar pace in investments next year.

Industry experts remain cautiously optimistic about 2025.

With steady economic growth and a stable government, India is positioned as a top emerging market destination.

“We invest in multiple countries, but India is very exciting near the top, for a number of investors, the reasons being growth, depth of talent, digital public infrastructure, and the depth of capital markets,” said Kumar, adding that for businesses with solid fundamentals, “there is enough dry powder out there” for capital deployment.

Soni added that geopolitical uncertainties, particularly around US policy under a new administration, could shape investor sentiment.

“Despite all uncertainties in the last two years, we were able to clock $50-55 billion.

"So, there is no reason why in 2025 we should not be able to do better, we should do 15-20 per cent better in terms of total investment activity in dollars,” he said.

Sharma forecast an uptick in buyouts and continuation vehicles (CVs) as the sector matures further.

“We will see more secondary deals, more IPOs from private equity, and more CVs as people figure out exits,” he noted.