Indian Exit Environment

The GPCA recently released a report titled “India’s New Chapter: What is Driving the Boom in Private Capital Exits.” Here, we provide a summary of the findings.

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.

Disclosures
The views set forth herein are solely those of the authors and do not necessarily reflect the views of Nodem Capital. The information and views expressed are generic in nature and are not an offer to sell or the solicitation of an offer to purchase interests in any investments or services. Certain information contained in this article may constitute “forward-looking statements”. Any projections or other estimates contained herein, including estimates of returns or performance, are “forward-looking statements” and are based upon certain assumptions that may change. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. There can be no assurance that the forward-looking statements made herein will prove to be accurate, and issuance of such forward-looking statements should not be regarded as a representation by Nodem Capital, or any other person, that the objective and plans of Nodem Capital will be achieved. 
This material does not constitute financial, investment, tax or legal advice (or an offer of such advisory services). It should not be viewed as advice or recommendations (or an offer of advisory services).
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London Office
Nodem Ltd

1a Britannia Street

London

United Kingdom

WC1X 9JT

Nodem Ltd is registered in England and Wales under company number 15661530. Please note that Nodem is currently in the process of seeking FCA authorisation. All investment activities will commence once regulatory approvals are in place.

 

This website is for informational purposes only and does not constitute an offer, solicitation, or recommendation to sell or an offer to purchase any securities, investment products, or investment advisory services. This website and the information set forth herein are current as of 30 June 2024 and are not intended to provide investment recommendations or advice.

London Office
Nodem Ltd

1a Britannia Street

London

United Kingdom

WC1X 9JT

Nodem Ltd is registered in England and Wales under company number 15661530. Please note that Nodem is currently in the process of seeking FCA authorisation. All investment activities will commence once regulatory approvals are in place.

 

This website is for informational purposes only and does not constitute an offer, solicitation, or recommendation to sell or an offer to purchase any securities, investment products, or investment advisory services. This website and the information set forth herein are current as of 30 June 2024 and are not intended to provide investment recommendations or advice.

London Office
Nodem Ltd

1a Britannia Street

London

United Kingdom

WC1X 9JT

Nodem Ltd is registered in England and Wales under company number 15661530. Please note that Nodem is currently in the process of seeking FCA authorisation. All investment activities will commence once regulatory approvals are in place.

 

This website is for informational purposes only and does not constitute an offer, solicitation, or recommendation to sell or an offer to purchase any securities, investment products, or investment advisory services. This website and the information set forth herein are current as of 30 June 2024 and are not intended to provide investment recommendations or advice.