The Rise of The Indian PE Market A Deep Dive into The Indian Private Equity Market

With fifty percent of the 1.1billion population being youngsters, India was a primary target for private-equity firms and their investors in the early years of the century. Private investors poured around 93 billion dollars into India in this period. After a healthy return of 25% gross returns at the exit, yields fell sharply to 7% returns at the exit between 2006 and 2009. This fall caused Indian PE market to lay low for a while. But if you check, in 2017 with a $26 billion investment and over 60% growth, the private equity market of India is showing a stronger comeback.

Reasons for growth

If we look into the reasons for the recent growth of the PE market in India, improvement in economic indicators, the formalized economy and the government handling NPA issues are plausibly the biggest of many. Despite the early setback, the investors are now coming back to India as a sustainable destination. It has resulted in a 48% growth of India-focused fundraising.

The diversification of fund sources is also a significant reason for this growth. The non-performing asset in the forms of sovereign wealth funds and pension funds started to participate and accounted for one-fifth of total investment. The registered alternative investment funds (AIF) accounted for more than $5 billion. There was also a considerable increase in the number of active players in the market and the number of institutional investors.
Combined, all these factors propelled private equity fundings to a new benchmark.

Competition in Market

The PE market in India witnessed a steep growth in competition for deals in 2017. Increase in the number of participating funds and PE funds developing pockets of strengths across sectors resulted in the competition like never before. The top 15 deals contributed about 50 percent of total investment. A whopping 95% growth has been registered in the size of sales greater than $10 million.


we witnessed more than 200 exits taking place in the last year primarily driven by the transaction value than an increase in deal volume. With a 7% increase in the number of exits, there was a 60% increase in exit value. The exit value reached a total of $15.7 billion.
Considering India's economic conditions we can expect more exits to happen shortly. Most funds are awaiting moderation in valuation to decline by 2 to 4 percent in the next five years.

Future of PE in India

Making new deals are going to be the top priority for funds in the following year. Since more funds are starting to engage in the market, we should expect more co-investment opportunities to limited partners. This can lead to reduced risks thus ensure more investment from limited partners.
A critical challenge in the Indian market is found to be the mismatch in valuation expectations between investors and firm owner. The leadership issues at portfolio companies are another common issue you would face if you are to go in the market.

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