Private equity and venture capital deals recorded a sharp contraction in May, with total investments plummeting 68% year-on-year to just $2.4 billion, according to a report by the Indian Venture and Alternate Capital Association (IVCA) and EY.
This marked the weakest monthly performance in at least a year, as geopolitical uncertainty, valuation mismatches, and cautious investor sentiment suppressed deal activity.
The report said only 97 deals were completed during the month, a 24% decline from May 2024, with large transactions above $100 million particularly scarce. Just six such deals were recorded, collectively worth $941 million, marking an 83% drop from the $5.6 billion in large deals seen during the same period last year. Even when compared to April, large deals are down 75% in terms of value.
The largest deal recorded during May was Ares Management’s $216 million debt funding in Bengaluru-based Century Real Estate, where it led the round with SC Lowy, a Hong Kong-based hedge fund.
Another notable deal in the real estate segment was Blackstone RE acquiring a 4% stake in Embassy Developments through a $75 million PIPE (private investment in public equity) transaction, marking a continued interest in high-quality commercial assets despite overall tepid deal volumes.
However, the start-up segment bucked the broader downward trend, with investments growing 21% year-on-year to $1.1 billion in May. Deals in the logistics sector contributed the most, driven by Kedaara Capital and Vitruvian Partners’ $200 million growth investment in SmartShift Logistics Solutions, also known as Porter.
The fintech segment also remained resilient, with GIC’s $150 million investment in Groww and Tiger Global’s $75 million follow-on in Cred. In the healthcare segment, General Catalyst led a $100 million round in PB Healthcare Services, one of the few sizeable healthtech deals during the month.
However, buyout deals nearly disappeared from the PE-VC space, plunging 96% to just $88 million in total value. The only notable buyout deal was Prime Offices Fund’s acquisition of Prius Platinum for $88 million, a stark contrast to May 2024 $2.3 billion in buyout activity. Credit investments also retreated significantly, dropping 77% to $319 million.
The exit market mirrored the investment slowdown, with total exit value falling 60% year-on-year to $1 billion across 18 deals. Open market exits dominated, representing 77% of the total exit value. The largest exit saw Carlyle sell a 10% stake in PNB Housing Finance for $320 million, followed by Antfin’s $246 million open market sale of Paytm shares.
Secondary exits totaled just $200 million, with the most notable being Peak XV’s partial exit from Porter through a $163 million secondary sale to Kedaara and Vitruvian. The IPO exit route also didn’t see many deals, except Ather Energy’s $35 million public offering.
Despite the slowdown in deals, fundraising activity defied the broader downturn, surging 391% year-on-year to $3 billion across 12 funds. The largest fundraising in May was Quadria Capital’s $1.07 billion healthcare-focused fund, which aims to build a portfolio of 10 companies.
Synergy Capital followed with a $714 million fund targeting industrial and infrastructure private credit opportunities, while Multiples raised $430 million for its continuation fund. Besides these, private equity major KKR also announced its $2.7 billion Asia Infra Fund 3.
The slowdown in investments in May was largely due to three key factors: persistent geopolitical tensions, particularly around US tariff policies; a widening bid-ask spread between buyer and seller valuation expectations; and general macroeconomic uncertainty.
“Domestically, early signs of positive momentum are emerging through robust GST collections, strengthening of Indian Rupee from the lows seen in the beginning of the year and the recent rate cut by the Reserve Bank of India which is expected to improve liquidity and provide further impetus to deal-making,” said Vivek Soni, partner and national leader, private equity services, EY India.
He expects a pickup in deal activity in the second half of the year if there is an easing of global uncertainties and geopolitical conflicts and convergence of the bid-ask spread between sellers’ and buyers’ valuation expectations.