Despite headwinds and a challenging funding environment, the Indian Private Equity eco-system is proving to be resilient and a consistent performer, offering robust growth prospects, attracting both domestic and international investors, according to Gaurav Sharma, Head of India Investment Business at Investcorp, a global alternative asset manager.
India stands out as a sweet spot, especially within emerging markets. While the US still remains an attractive market, capturing a significant share of global capital, India is being recognized as a prime destination for capital deployment, with many investors actively evaluating its potential.
Excerpts of an interview with businessline:
Are private equity funds in India finding it difficult to raise funds overseas?
A. This is the most challenging environment for raising funds in India The theme of the US attracting the majority of global capital is very real, as most investors currently see the US as a safer and more familiar market.
Why invest in a relatively new market when you can invest in the US right now? I have also been on the road raising our India fund, meeting a few dozen, if not close to 100, LPs, particularly in Europe, Singapore, and Hong Kong. For GPs in India attempting to raise capital for a fund, it has become quite difficult.
I can confirm that raising capital for India requires a compelling argument and clear differentiators. Investors are scrutinising funds closely, looking for distinctive value propositions. Aside from a handful of large funds, few funds have managed to raise significant capital.
In a recent article Ruchir Sharma said investments in the US as per the global allocation is by far at an all-time high. So if all the allocations are going to the US, how will it be easy to raise funds for India?
Despite global headwinds, Investcorp has successfully demonstrated its strength in fundraising for India. We’ve stood out by showcasing our performance, leveraging our leadership team’s expertise, and demonstrating the unique opportunities India offers. This has allowed us to make our mark and gain investor confidence even in this competitive environment.
As we have said, we are targeting north of a $400 million fund and remain on track to achieve that. We will announce the final close in the next couple of quarters.
So how do you see private equity flows in 2025.. will the new administration in the US have any effect at all and would the FPI flows have any bearing on PE flows?
Private equity as an industry has been pretty consistent in India over the last few years. We’ve delivered some amazing exits, thanks, to the IPO market. And that holds well for the future of the Indian PE industry too.
The exits were the biggest concern for LPs investing in India over the last 15 years. And India, from an exit point of view, has been way behind some of the other countries.
In the last couple of years the exits out of India have been pretty strong. I don’t expect private equity to slow down in India in 2025. I would expect as long as there’s attractive deal flow, we will have both in the mid-market and the large cap, private equities continuing to flow in at a pretty steady pace, as it has been happening, in the last few months.
The uncertainty over what the Trump administration does is certainly there. But, you have to separate out the macro from the micro…. the macro is uncertain, but private equity is a micro game. You’re looking at individual deals, as long as you find that deal attractive, you can ignore the macro. People will figure out good PEs and back them, whether they are the domestic funds or foreign funds. Private equity liquidity is at an all-time high. So yes, I’m pretty positive about calendar year 2025 outlook.
How is the deal pipeline looking for Investcorp? Are you looking at more buyout transactions?
A. We recently completed our first buyout deal with NSEIT, a ₹1,000 crore full buyout, marking a significant milestone for us. This is just the beginning—you can expect to see more buyouts from us in the future.
While not everyone in the mid-market space is focusing on buyouts, we see tremendous potential here and anticipate including one to three buyouts in our new fund. We are also in advanced stages of closing another deal in the manufacturing sector, and we are optimistic about building a robust pipeline of transformative investments in the coming months.
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