The original report can be found here: https://www.globalprivatecapital.org/research/indias-new-chapter/

Summary

• The value of private capital exits in India surpassed USD25b in 2023 and USD11b in 1H 2024, bucking global private capital liquidity slowdown. After the ups and downs of past private capital cycles in India, structural changes in the market are contributing to growth in exits across all channels: A boom in retail ownership across Indian stock markets has driven public equity indices to all-time highs, with GPs increasingly opting to list companies locally.

• Global GPs and sovereign funds are shifting attention and capital deployment to India, boosting secondary sales and providing a path to exit for middle-market Indian GPs.

• With stronger balance sheets, Indian corporates drive most strategic sales.

• India’s policy outlook – including increased infrastructure spending – remains favourable, and recently announced IPO registrations, strategic sales and secondary buyouts of private capital-backed businesses point to continued momentum.

Key factors driving the strong exit environment

1. Public Market Strength:

• Retail Investor Boom: A surge in retail investors entering the Indian stock market has propelled indices like the Nifty 50 to record highs. This boom provides a favourable environment for IPOs, making public listing an increasingly attractive exit route for General Partners (GPs).

• Strong Domestic Investment: Domestic Institutional Investors (DIIs) are increasing their stake in Indian public equities, offsetting the recent pullback from Foreign Institutional Investors (FIIs).

• Rupee Stability: The Indian Rupee's relatively stable performance against the US dollar in recent years, supported by the Reserve Bank of India's robust foreign exchange reserves and capital controls, has boosted investor confidence and contributed to stronger returns.

2. Shifting Global Investment Landscape:

• Focus on India: Global GPs and sovereign wealth funds, particularly from the GCC, increasingly focus on India amidst uncertainties in China. This shift translates to increased primary capital investment and direct secondary deals, providing liquidity for local GPs.

• Rise of Continuation Funds: Indian GPs are increasingly utilising continuation funds, allowing them to hold onto promising assets while providing liquidity to existing investors. This trend, already prevalent in the US and Europe, further enhances exit options for Indian GPs.

3. Robust Strategic Sales:

• Strong Corporate Buyers: Indian corporates dominate strategic sales, fueled by strong balance sheets resulting from record-high public market valuations. This trend signifies a shift from previous years where international buyers, particularly from China, were more prominent.

4. Favourable Macroeconomic and Policy Environment:

• Strong Economic Fundamentals: India's robust GDP growth projections, young demographic, and expanding middle class create a positive outlook for businesses and attract private capital investment.

• Government Support: Pro-business policies, including FDI liberalisation, the "Made in India" initiative, and infrastructure development programs, further bolster investor confidence.

Looking Ahead: The report suggests India's private capital exit momentum will likely continue. A strong pipeline of upcoming IPOs, coupled with sustained interest from global investors and a supportive policy environment, point towards a bright future for the Indian private capital market.

Read more about India's VC ecosystem here.