Global investor interest in Indian private equity growing: Preqin reports

The resilience of venture capital (VC) deals
Global macroeconomic challenges have triggered a cautious sentiment among investors towards venture capital in recent years, which has negatively impacted deal activity in India. Deal activity decreased from 2,249 in 2021 to 961 in 2023, and total deal value fell from $40.2 billion to $13.7 billion in the same period.

Still, the outlook for venture capital in India remains strong. Despite the post-2021 decline, India still ranks second after Greater China when it comes to transaction value in the Asia-Pacific (APAC) region.

Investors have adapted to the new environment by shifting their focus towards high-quality assets and emphasizing profitability, leading to renewed optimism about India’s long-term potential.The continued stability of private capital
In recent years, private equity has come to the fore in India, a market traditionally known for its strong venture capital scene. India’s outbound market, a vital component of private equity investment, has also performed well. According to Preqin data, departures increased from 49 in 2022 to 85 in 2023. With 46 departures already recorded in the first half of 2024, the outlook remains positive. This success has been largely driven by the strong performance of India’s public markets, which have outperformed those of most major economies.

The meteoric rise of private debt
The assets under management of India-focused private debt funds have grown a staggering 26-fold, from $700 million in 2010 to $17.8 billion in 2023, far outpacing other asset classes in India and setting the category as a leader in APAC.

This impressive growth has been driven by India’s urgent need for financing. Many medium-sized and fast-growing businesses are constrained by a significant funding gap, as the conservative lending practices of local banks often fail to meet their various capital needs. Private debt lenders are stepping in to fill this gap, offering more flexible financing solutions that banks cannot offer.

Regulatory improvements have also played a key role. The Indian government’s introduction of the Insolvency and Bankruptcy Code, 2016 (IBC) has accelerated insolvency resolutions and maximized returns for creditors, further boosting investor confidence.

The greatest growth potential of the real estate sector
Assets under management of India-focused real estate funds have grown steadily from $12.7 billion in 2010 to $21.3 billion by the end of 2023. However, there is room for further growth. According to data from Preqin, India currently accounts for just 8% of assets under management of real estate funds across the APAC region.

The Indian real estate market seems primed for this growth now. While it has always offered scale to investors, it now also offers stability. A stable economic and regulatory environment has helped institutionalize the real estate market and make it more attractive to investors.

While the number of infrastructure deals in India fell from 139 in 2022 to 92 in 2023, Preqin data shows that the country maintained its position as the most active infrastructure deal market in the APAC region. With a total value of $14.1 billion by the end of 2023 and a promising $9.5 billion from 77 deals in the first half of 2024, infrastructure has established itself as a dynamic and promising market in India.