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Private Equity (PE) in India

How India’s PE/VC outlook for 2025 remains positive amid uncertainty

A photographic portrait of Vivek Soni
Vivek Soni

Private Equity Leader, EY India

5 minute read 20 Feb 2025

Growth in investment volume and value projected despite challenges and global volatility.

In brief

  • Strong start to 2025: PE/VC investments increase 37% m-o-m in January, despite a dip from January 2023.
  • Exits slow down: January 2025 sees a 48% decline in exits compared to December 2024.
  • Declining interest rate curve in 2025 could drive uptick in PE/VC investments in infrastructure and real estate.

As we enter 2025, our outlook for private equity (PE) in India and venture capital (VC) in India remains optimistic despite the challenges and uncertainties facing the global economy. The year ahead could be an exciting one for investors as heightened risk and uncertainty coupled with deep correction in the listed mid-cap and small-cap segment create an environment that is favorable to buyers/ investors. 

Strong start to 2025: Signs of optimism

The beginning of 2025 has shown promising momentum, with PE/VC investments in India increasing by 37% month-on-month in January. While this marks a slight dip compared to January 2024, the sequential uptick from December 2024 notwithstanding the spike in uncertainty on geopolitics as well as aggressive changes being rolled out by the new US trade and foreign policy is encouraging.

Impact of interest rates on PE/VC investments

Another important factor that will influence PE/VC investments and exits in India is the expected decline in interest rates in 2025. This trend could provide a boost to investments, particularly in yield generating sectors like infrastructure and real estate, as investors move fast to buy assets to take advantage of yield compression. Lower borrowing costs will also improve bottom lines of companies that are levered/ looking to take on debt to fund growth capex.

2024: A year of challenges and triumphs for PE/VC

The PE/VC market in India in 2024 faced numerous challenges, from major political events such as India’s general elections to persistent geopolitical tensions, slowing growth and the impact of the depreciating Indian rupee. Notwithstanding these challenges, PE/VC investments in India held strong, totaling US$56 billion–the second highest on record. These numbers underline India’s strong macroeconomic environment and political and policy stability conducive to investment.

Sectoral shifts and emerging investment trends

In 2024, investment activity across various sectors in India’s PE/VC ecosystem showed both growth and contraction. Sectors such as e-commerce, technology, financial services, media and entertainment, and food and agriculture experienced significant growth, while sectors like life sciences, industrial products, and retail consumer products saw reduced investor interest. Notably, infrastructure, real estate, and financial services led the pack, with infrastructure remaining dominant, and real estate seeing a slight decline from last year.

Exit dynamics in 2024: A mixed picture

In 2024, exit value reached US$26.7 billion, a 7% increase from 2023, despite a slight 7% decline in the number of exit deals. While some investors took advantage of buoyant capital markets to secure returns through IPOs and open market exits, it remained a challenging year on account of slowing growth and increase in uncertainty.

Looking ahead: A positive outlook for 2025

The outlook for PE/VC investments in India remains positive as we move into 2025. Despite a 9% decline in January 2025 compared to January 2024, the uptick in investment activity from December 2024 signals optimism for the year ahead. The favorable macroeconomic environment, stable government policies, and a correction in the public markets is expected to improve PE/VC deal volume and value as seller expectations get more aligned with investor valuations.

The recent and continued correction of listed mid-cap and small-cap indices could provide a more balanced investment climate, presenting significant opportunities for both domestic and international investors in India’s PE/VC ecosystem.

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Sectors to watch in 2025 and beyond

 

Key sectors to watch for PE/VC investments in India include infrastructure, real estate, financial services, technology, e-commerce, healthcare, and pharmaceuticals. The green energy transition and renewable sector are expected to attract significant attention from investors, as India moves to realize its sustainability goals. These sectors offer a broad range of opportunities for investors looking to capitalize on India’s growth and transformation.

 

Conclusion: India’s PE/VC ecosystem in 2025

 

India’s PE/VC ecosystem is navigating a period of significant change, but optimism for 2025 is undeniable. The combination of a strong macroeconomic foundation, evolving sectoral opportunities, and potentially favorable investment conditions are expected to help India remain attractive for PE/VC investments.

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Summary

India's PE/VC outlook for 2025 remains positive despite global challenges. January investments rose 37% month-on-month, while exits dropped 48%. In 2024, US$56 billion was invested across sectors like infrastructure, financial services, real estate, tech, ecommerce, healthcare, and industrial products, though interest in pharmaceuticals, retail, and automotive decreased. A correction in public equity markets could lower valuations, narrowing the gap between seller expectations and investor valuations, potentially boosting PE/VC transaction volume and value. Declining interest rates could also drive investment in infrastructure and real estate, with heightened volatility offering opportunities for agile investors.

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About this article

A photographic portrait of Vivek Soni
Vivek Soni
Private Equity Leader, EY India
Strategic thinker and leader. More than 22 years of experience in M&A advisory, Private Equity investing, structured finance and running a PE portfolio company. Passionate biker and avid traveler.
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