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Private Equity In India

After the Walmart – Flipkart deal, the Indian Private Equity (PE) market was buzzing with foreign investors keen to expand operations in India. Recent investments in Jio Platforms by global Private Equity players like KKR, Silver Lake etc. have renewed interest in how PE firms adapt to the Indian business ecosystem. With the boom of start-ups in India in the past few years, Venture Capital firms have also been on the watch, scouring the market for potential investment opportunities. In this article, we explore the history of Private Equity in India, the challenges faced by these firms and the road ahead.

History of Private Equity in India:

India’s earliest PE pioneers launched their initial funds in the late 1990s. They faced a dual challenge of convincing prospective limited partners (LPs)a as well as entrepreneurs, most of whom had never heard about this asset class – that the PE model could work in India. Nevertheless, these firms enjoyed the lack of competition and achieved relative prosperity.

During 2000 – 2005, the economic liberalization policies of the 1990s began to take effect and India was identified by numerous global PE firms as a place with immense growth potential. Money started pouring in. PE firms enjoyed healthy returns in India from investments made between 2004 and 2006. Lack of competition allowed PE firms to invest at lower valuations. Even bad investments did well. Prior to 2007, the market was relatively simple to approach.

Fundraising for India-focused private equity funds reached an all-time high by 2008 with US$8 billion1 in commitments raised. Along with this increase in capital, the number of General Partners (GPs)a operating in India increased drastically within a short period of time. Global PE firms like Blackstone, The Carlyle Group, KKR, Bain Capital etc. ventured into the Indian market and established their local offices in India.

By 2009, however, the aftermath of the global financial crisis hit India. Firms struggled to invest funds they had already raised. Valuations remained particularly high. Numerous GPs that had raised their first funds in 2007 and 2008 had minimal track records and found it difficult to raise follow – on funds. The PE market in India entered a consolidation phase.

Recent Developments: 2017 Onwards


After two consecutive record-setting years, Indian PE/VC investments notched another new all-time high in 2019, crossing US$48 billion. Over the past three years, PE/VC investments in India have grown at a CAGR of 44%. Cumulative PE/VC investments received during this period (2017 – 2019) are almost equal to the investments received in the preceding 10-year period between 2007 to 2016.


Timely exit opportunities are as important for PE firms as finding the right investment opportunities. Exiting their investments is the mechanism by which PE firms realize actual returns and move on to other investments. PE/VC exits too have had a good run over the past three years (2017 – 2019). In each of the last three years, PE/VC funds have clocked exits of over US$10 billion. From 2009 to 2019, Indian PE/VC exits aggregated ~US$82 billion, of which 63% have come in the last three years.

Fund Raising

Fund raising by PE/VCs has increased by 45% to US$11.7 billion in 2019 compared to US$8.1 billion in 2018, further adding to the existing high levels of dry powder available with PE/VC funds for deployment in India.

Growth Drivers in 2019:

India has been ranked among the top emerging market destinations for LPs globally to make GP investments. On a year-on-year basis, in 2019, Indian PE/VC investments grew by 28% and 35% in terms of value and volume, respectively. However, unlike the previous years, the growth drivers in 2019 were different.

In 2017-2018, the major growth in buyout activity was in the traditional PE/VC asset classes. In 2019, this shifted to infrastructure and real estate asset classes. PE/VC investments in the infrastructure sector accounted for almost 30% of the total PE/VC investments made during 2019 and grew approximately 3 times over the previous year.

PE – Backed IPOs:

Improvement in capital markets spurred open market exits for PE firms. IPO activity in 2019, however, remained lacklustre with just 8 PE – backed IPOs hitting the bourses compared to 13 in 2018. 2019 saw India’s first Real Estate Investment Trust (REIT)b IPOc offering, backed by the Embassy/Blackstone consortium. This was a significant moment for the Indian real estate PE sector which has seen huge investments in the past 3 – 4 years. Strong investments in real estate and infrastructure are expected to result in more PE – backed companies in these sectors to go public in the coming years.

Major Players:

ICICI Venture Fund Management and Kotak Private Equity Group are the most esteemed domestic PE firms operating in India. However, the largest PE funds operating in India are the Indian arms of global ones like The Carlyle Group, Blackstone, TPG etc.

Outlook for Private Equity in India:

As yields in developed countries are on a declining trend, PE investments in India are expected to retain their current momentum in the years to come. Asset managers are increasingly shifting to emerging markets and India is expected to be a key beneficiary of this shift. With India forming a major part of the investment strategy for many global funds, we are likely to see a meaningful share of funds allocated for emerging markets being deployed in India.

Infrastructure and real estate are expected to continue to attract strong interest from investors. Financial services, IT, e-commerce, retail consumer finance and healthcare are some other sectors are expected to witness continued PE interest.

Uncertainty due to global factors like US-China trade issues and the Covid – 19 pandemic is a cause of concern. Domestic issues like a slowdown in economic growth and lack of liquidity are also expected to be major concerns. Earlier, global PE firms used to see India as a risky market and expected large returns over a short period of time. After a few years of operations, they have learnt to navigate the Indian market successfully and identify profitable investment opportunities. Policy stability and continuing reforms by the government will act as major reassuring factors for Private Equity investors to invest in India.



Limited Partners and General Partners: A limited partnership is a partnership made up of two or more partners. The general partner (GP) oversees and runs the business while limited partners do not partake in managing the business. However, the general partner has unlimited liability for the debt, and any limited partners (LPs) have limited liability up to the amount of their investment.

REITs: A real estate investment trust is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centres, hotels and commercial forests.

IPO: Initial Public Offer or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail investors.

Author: Akarsh Garg

Akarsh is a data science, finance and writing enthusiast currently studying as an undergraduate at IIT Delhi. He closely tracks the financial markets and economic policies of the government.

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