The private equity and venture capital market is expected to see an increase in investment this year, driven by better market valuations and large amounts of dry powder in the ecosystem. However, concerns remain over the potential impact of upcoming trade policies by the new US government and the rupee’s depreciation hurting investor returns.
“As India’s corporate earnings begin to improve, and the gap between buyer and seller expectations narrows, we anticipate a significant infusion of PE/VC investments into the country,” said a report by the Indian Venture and Alternate Capital Association (IVCA) in association with EY.
The industry body expects the ongoing correction in the equity markets, especially in the mid-cap and small-cap space, to help close the gap between seller expectations and buyer valuations and boost the value and volume of PE/VC deals. “Heightened volatility and risk will create buying opportunities for the smart and nimble investors,” the report added.
So far this year, the numbers have been optimistic. In January, PE-VC investments were 37% higher at $6.27 billion, compared to December 2024, but still 9% lower than January last year. The number of deals was nearly the same at 101. Buyout deals drove most of the growth in January, much like 2024 when it accounted for 30% of the overall PE-VC deals.
After two years of decline, PE-VC investments recorded a slight uptick of 5% to $56 billion in 2024, recording the second-highest investment value to date. Last year also recorded the highest-ever deal volume at 1,352, up 56% year-on-year.
This recovery was mainly due to an increased buyout and credit investments as well as an increase in startup investments.
India’s PE-VC investments had hit a record high of $76.7 billion in 2021, driven by near-zero interest rates. Buyout deals led the growth in 2024. While the deal volume remained flat, the dollar value of PE-VC buyout investments saw a 39% jump, reaching $16.8 billion. The largest buyout deal of the year was the acquisition of ATC India Tower Corp by Data Infrastructure Trust (a Brookfield-sponsored infrastructure investment trust) for $2 billion.
In terms of sectoral allocation, infrastructure, financial services, and real estate were the top three sectors with more than 100 deals each. “A downward sloping interest rate curve in 2025 could spur an increase in investments in infrastructure and real estate asset class as yield investors look to lock in long-term yields before asset prices inflate,” the report predicts.
As for exits, 2024 has seen deals worth $26.7 billion up 7% year-on-year. The increase was mainly driven by open market exits, which accounted for nearly half of all exit deals last year. 2024 saw the second-highest number of PE-backed IPOs, with 40 listings. The deal volume, however, climbed down from an all-time high of 304 in 2023 to 282.
So far this year, exit deals are having a slow start. In January, exits almost halved to $1 billion with only 8 deals, compared to December. Most of the exit value came from secondary sales of shares.