The golden age: PE/VC flow may touch $65 bn by 2025

India is well positioned to attract a disproportionately higher share of global private capital. Experts say if political and policy stability permit, Indian PE/VC investment levels could cross the threshold of $65 billion by 2025.

In 2018, PE/VC investments rose 37% to touch $35.8 billion from $26.1 billion in the year-ago period. 

Vivek Soni, Partner and National Leader for Private Equity Services at EY, said India ranks amongst the most attractive emerging markets for general partners (GPs).

Because of PE/VC GP’s continued ability to generate returns that are superior to public market returns, limited partners (LPs) are expected to allocate higher risk capital to the PE/VC asset class in the future.

It may be noted, large LPs started investing directly in the Indian market. Private investment in public equity (PIPE) investments have witnessed strong growth. 2018 has been one of the better years for PIPE investments since 2008, with $3.7 billion in investments, closely following $3.8 billion invested in 2017.


Exits are at an all-time high of $26 billion, double the value recorded in 2017, on the back of strong performance in strategic and secondary exits despite sharp declines in open market and IPO exits (nearly 50 % drop), as the current market conditions no longer remain conducive for IPOs.

Open market exits have declined to less than a third of the values recorded last year both in terms of value and volume. As buyouts become more prevalent, strategic sale is emerging as a strong exit option with many global corporates looking to get a foothold in the Indian market.

PE/VC investments and exits in India reached $61 billion in 2018 from $200 million in 1998, a CAGR of 33 per cent over 20 years.


 2018 is expected to become an inflection point for the Indian PE/VC industry as PE/VC exits come close to the value of PE/VC investments, moving towards mature market standards and away from previous trends where the PE/VC exits would almost always be less than 50 per cent of PE/VC investments. India as an investment destination is attracting many new global PE/VC funds as well as large LPs that are seeking direct investment opportunities. This is providing a new pool of capital and enabling early investors to get favourable exits.

"While the Indian GDP has grown at 7.7% during the five year period of 2013-2018, PE/VC investments have grown at a CAGR of 25.23%, supporting our initial thesis that PE is an asset class that does better in larger economies," says the EY report. "We think this Golden Age of PE/VC will continue for some time globally," it added. 

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