Private Equity News India: Latest Developments and Trends in the Industry

Despite the economic impact of the coronavirus pandemic, India's private equity market has remained resilient, with the PE-VC market bouncing back from a pandemic-induced slowdown with fury in 2021, reaching approximately $70 billion in investments.

Private equity firms in India have been active in a wide range of sectors, including healthcare, technology, and financial services.

The sector has been buoyed by the country's strong economic growth, as well as by the government's efforts to improve the business environment and attract foreign investment.

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Private equity investors are attracted to India's large and growing consumer market, as well as to the country's highly skilled workforce and vibrant startup ecosystem.

Overview of Private Equity in India

India's private equity market has grown significantly in the last few years, with investments reaching approximately $70 billion in 2021. Private equity investments in India hit a record high of $62.2 billion in 2020, despite the uncertainty caused by the COVID-19 pandemic. This growth in the private equity market can be attributed to a number of factors, including strong economic growth, a large and growing middle class, and a favourable regulatory environment.

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Private equity investments in India are typically made by a wide range of investors, including private equity funds, venture capital firms, family offices, and other institutional investors. These investors typically invest in a range of assets, including growth equity, buyouts, and venture capital.

In recent years, venture capital and growth equity have gained prominence in India's private equity market, with investors increasingly focusing on early-stage companies with high growth potential. However, buyouts remain a significant part of the private equity market in India, with investors continuing to invest in established companies with a proven track record.

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Overall, India's private equity market is expected to continue to grow in the coming years, with investors increasingly attracted to the country's strong economic growth and favourable regulatory environment. As such, private equity is likely to remain an important source of capital for Indian companies looking to grow and expand in the years to come.

Sector-Wise Investment Breakdown

Private equity investments in India are seeing a steady growth across various sectors. Here is a breakdown of the investments across different sectors:

Technology Sector

The technology sector continues to attract a significant amount of private equity investments in India. Consumer tech, e-commerce, and other technology-based startups are the major beneficiaries of these investments. In 2023, the technology sector accounted for 25% of the total private equity deal value in India, with a total investment of $15.4 billion.

Healthcare Sector

The healthcare sector in India has seen a significant increase in private equity investments in recent years. Hospitals and healthcare service providers, such as Care Hospitals, have been the major beneficiaries of these investments. In 2023, the healthcare sector accounted for 12% of the total private equity deal value in India, with a total investment of $7.4 billion.

Infrastructure Sector

The infrastructure sector in India has also seen a significant increase in private equity investments in recent years. Infrastructure projects such as roads, airports, and ports have been the major beneficiaries of these investments. In 2023, the infrastructure sector accounted for 10% of the total private equity deal value in India, with a total investment of $6.1 billion.

Real Estate Sector

The Indian real estate sector has also seen a significant increase in private equity investments in recent years. The investments have been focused on commercial and residential real estate projects. In 2023, the real estate sector accounted for 8% of the total private equity deal value in India, with a total investment of $4.9 billion.

Financial Services Sector

The financial services sector in India has seen a significant increase in private equity investments in recent years. Companies such as Credila, a non-banking financial company, have been the major beneficiaries of these investments. In 2023, the financial services sector accounted for 7% of the total private equity deal value in India, with a total investment of $4.3 billion.

Manufacturing Sector

The manufacturing sector in India has also seen a significant increase in private equity investments in recent years. Investments have been focused on companies in the automotive, engineering, and consumer goods sectors. In 2023, the manufacturing sector accounted for 6% of the total private equity deal value in India, with a total investment of $3.7 billion.

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Overall, private equity investments in India are seeing a steady growth across various sectors. Large deals and megadeals are becoming increasingly common, with deal values continuing to rise. The technology sector, healthcare sector, and infrastructure sector are the top three sectors that have attracted the most investments in recent years.

Key Players in India's Private Equity Market

India's private equity market is home to a range of key players, including international firms like KKR, GIC, Carlyle, Blackstone, TPG, Warburg Pincus, BPEA, EQT, and SoftBank, as well as domestic firms like ChrysCapital.

KKR is one of the biggest and most well-known private equity firms in the world, with a significant presence in India. The firm has invested in a number of Indian companies across a range of sectors, including healthcare, financial services, and technology.

GIC, the sovereign wealth fund of Singapore, is another major player in India's private equity market. The firm has invested in a number of Indian companies, including HDFC, Bandhan Bank, and Bharti Airtel.

Carlyle is a global private equity firm that has been active in India for many years. The firm has invested in a number of Indian companies, including SBI Cards and Payment Services, PNB Housing Finance, and Delhivery.

Blackstone is one of the largest alternative asset managers in the world, with a significant presence in India's private equity market. The firm has invested in a number of Indian companies across a range of sectors, including real estate, healthcare, and technology.

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Investment Trends and Valuations

Private equity investment in India has seen a moderate decline in investment value, with a 12% decrease from the peak of $69.8 billion in 2021 to $61.6 billion in 2023. However, the positive economic outlook supported by structural enablers such as a large consumption opportunity, improved digital infrastructure, and China + 1 tailwinds have contributed to the growth of private equity in India.

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Cheque sizes have remained stable, with private equity growing by approximately 10% against H2 2022, reaching $16.5 billion. This growth is gradually gaining back share lost to venture capital and growth equity in 2021, which continued to lose steam, with a contraction in deal value in H1 2023, compared to H2 2022, to close at approximately $5 billion.

Valuations have remained stable, with a moderate decline in investment value. Pure play private equity and venture capital investments declined by 38% year-on-year, offset to a small extent by the rebound in private equity and venture capital investments in the infrastructure and real estate sectors.

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In summary, private equity investment in India has seen a moderate decline in investment value, with cheque sizes remaining stable and valuations remaining stable. Bearish sentiment has been observed in the private equity market, but the positive economic outlook and structural enablers continue to support private equity growth in India.

Comparative Analysis with China's Private Equity Market

India and China are two of the largest economies in Asia, and both have seen significant growth in their private equity markets in recent years. While India has been experiencing a surge in private equity investments, China has been facing headwinds due to a slowing economy, increased regulatory scrutiny, and the Covid-19 pandemic [1][2].

In terms of deal volume, China still holds the top spot in Asia's private equity market. However, India is catching up fast, and some experts predict that India may soon overtake China as Asia's largest private equity market. In 2021, private equity firms invested $62.0 billion across 533 deals in Greater China, while the average deal size witnessed an increase of 31% to $175 million in YTD21 [2]. In contrast, India's private equity market has seen a surge in activity, with a total of 323 deals worth $22.1 billion in the first half of 2023 [1].

One of the reasons for India's growth in private equity investments is its favourable regulatory environment, which has been attracting foreign investors. The Indian government has introduced several reforms to ease the process of doing business in the country, such as the introduction of the Insolvency and Bankruptcy Code and the Goods and Services Tax. These reforms have made it easier for private equity firms to invest in Indian companies [1].

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Another factor contributing to India's growth is its young population and growing middle class, which is creating a large consumer market for private equity firms to tap into.

This has led to an increase in investments in sectors such as e-commerce, healthcare, and education [1].

In contrast, China's private equity market has been facing challenges due to increased regulatory scrutiny and the ongoing trade tensions with the US.

The Chinese government has been cracking down on private enterprises, which has made it more difficult for private equity firms to invest in Chinese companies.

This has led to a decline in private equity fundraising and exits in China in recent years [2].

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In summary, while China still holds the top spot in Asia's private equity market in terms of deal volume, India is catching up fast and may soon overtake China as Asia's largest private equity market. India's favourable regulatory environment and growing consumer market are attracting foreign investors, while China's private equity market is facing challenges due to increased regulatory scrutiny and trade tensions with the US [1][2].

[1] Reuters. (2023, June 5). India's private equity race for growth. https://www.penews.com/articles/indias-private-equity-race-for-growth-20230605

[2] BDA Partners. (2023). China Private Equity Report 2023. https://www.bdapartners.com/insights/china-private-equity-report-2023/

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