OPPORTUNITY KNOCKS, BUT CHALLENGES AWAIT

INDIA'S BOOMING PE MARKET ATTRACTS INVESTMENTS IN CONSUMER AND INFRASTRUCTURE, BUT CHALLENGES LOOM. CAN FIRMS PRIORITIZE VALUE CREATION TO NAVIGATE THE RISKS?

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Underpinned by powerhouse demographics, robust domestic demand, and a rock-solid economic foundation, India's ascent to becoming the world's third-largest economy by 2027 is well underway. This meteoric rise creates a dynamic landscape for private equity (PE) investments, brimming with promising opportunities alongside persistent challenges.

BOOMING PE MARKET

Forecasts paint a picture of sustained GDP expansion. Estimates project growth rates of 6.5% in fiscal year 2024-25, with a further acceleration to 7% in 2026. This projected growth positions India as an increasingly attractive investment destination, outpacing forecasts for China and poised to surpass major global economies like Japan and Germany.

Capitalizing on this economic momentum, India's private equity market has witnessed remarkable growth, with an average annual investment volume of approximately $40 billion over the last five years.

While there has been a slight dip from the peak in 2021, aligning with the global trend of post-pandemic normalization in deal-making activities, private equity investments in India remain substantial. This reflects investors' enduring confidence in India's favourable economic conditions and long-term growth prospects.

SHIFTING LANDSCAPE

This confidence is further underscored by a notable trend: the significant increase in buyout transactions. These deals, which comprised just 5% of investments in 2010, have risen to 19% by 2022.

This shift evidences a maturing corporate landscape and a growing openness among family-owned businesses to engage with private equity firms. Moreover, the availability of a strong pool of managerial talent, both domestically and globally, has enhanced the feasibility of control deals, further driving the evolution of India's private equity market.