Private equity (PE) investments in India have fallen to a 6-year low at $24.2 billion in the financial year ending March 2024.
Investments via PE deals are down 47 per cent compared to FY23, when private equity deals worth $45.8 billion were signed.
According to data sourced from Bloomberg, PE firms had signed record deals worth $80 billion in the financial year ending March 2022.
In the financial year ending March 2022, the investments were made by various PE firms, primarily in Reliance Jio and Reliance Retail.
The PEs signed 960 deals in the 2023-24 compared to 1,334 transactions in 2022-23.
Maneesh Bhandari, co-founder and chief executive officer (CEO) at Growthpal, a mergers and acquisitions (M&A) deal-sourcing platform, said multiple factors contributed to this trend, including lack of liquidity in the international markets.
The other factors are increasing interest rates, volatile market conditions, funding winter, geopolitical uncertainties and tight private markets.
“Along with this, there was a huge valuation mismatch between the parties and the sellers preferred to wait,” Bhandari said.
Despite the slowdown in the financial year gone by, private equity firms and bankers are optimistic about the future.
US-based private equity major KKR said it is planning to invest a significant portion of its new $6.4-billion Asia-focused fund in the Indian infrastructure sector — roads, highways, and renewables. It has already invested $10 billion in the country.
Another US-based PE firm, Blackstone plans to assemble a $25 billion portfolio of Indian PE assets over the next five years, Bloomberg reported recently.
Singapore’s Temasek has invested $17 billion in India so far, and plans to pump in another $9-10 billion in the next three years.
These will be in healthcare, IT, SaaS, and fintech sectors, its executives said in July last year.
Canada’s Brookfield Asset Management is also a large investor in India’s telecom tower infrastructure, realty, and renewable energy sectors, with bets worth $25 billion.
Going forward, PE firms are optimistic about increasing their investments in India.
Henry McVey, Partner, Head of Global Macro, Balance Sheet & Risk, and CIO of KKR Balance Sheet had said in a statement in February that, “While there definitely will be bumps along the way, we do think superior economic growth, greater capital appreciation of the public markets, and more value creation across private investments is possible in a country that is collectively poised to represent 20 per cent of the total incremental global growth over the next five-seven years.”
Bhandari said the valuation expectations have improved among the sellers.
He added, “We are seeing new private equity firms entering this space and are looking to acquire and invest in companies in India.
"Notably, smaller players are also actively engaging in deals.
"The existing PEs possess significant dry powder and are bullish on India as a market."
