Investments in Private Markets in India 2023-24
India’s private equity and venture capital investments will total approximately $77 billion in 2023, demonstrating the country’s resilience and growth potential. Even though this is down slightly from $81 billion in 2022, 2023 should be seen as a temporary setback in a trend that is generally going up. Notably, the number of transactions increased to 2224 in 2023, up from 1911 in 2022. This increase in deal activity demonstrates a firm belief in India’s long-term economic potential, especially in the mid-market segment, which has emerged as a major investment focus. Looking ahead, the outlook for 2024 remains optimistic, with expectations that investment levels will rebound to around $85 billion, reinforcing the enduring attractiveness of India’s private equity landscape.
Sectoral Shifts: Spotlight on Technology and Consumer
Eighty percent of all PE/VC investments in 2023 will be made in the consumer and technology industries because they have been the most appealing to investors. The SaaS and fintech industries have emerged as major drivers within technology, with fintech alone attracting $12 billion in 2023, up from $9 billion in 2022. On the other hand, the consumer sector has made significant investments worth $10 billion in fast-moving consumer goods (FMCG) startups and direct-to-consumer (D2C) brands. Private Investment Article Img 2.1.png
3.Rise of ESG-Driven Investments
In India’s private markets, environmental, social, and governance (ESG) considerations now play a major role in investment decisions. ESG-related investments accounted for $7 billion in 2023, with a strong focus on sectors such as renewable energy, electric mobility, and sustainable agriculture. This trend is expected to grow, with projections indicating ESG investments could reach $10 billion by 2024.
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5.With significant reforms aimed at making it easier to conduct business and facilitating investment, India’s regulatory landscape continues to change. However, compliance and regulatory navigating presents unique challenges for mid-market businesses frequently, particularly in the healthcare and financial services industries. Despite these challenges, the reforms have created a more investor-friendly environment, with 78% of PE/VC investors citing regulatory improvements as a key factor in their investment decisions.
Innovation in Deal Structuring
Deal structuring innovations increased in 2023 and 2024, with a growing preference for hybrid models that combine equity and debt. These structures accounted for 25% of total deal value in 2023, up from 18% in 2022. Because it allows for greater flexibility and risk mitigation, this strategy has been particularly advantageous in the middle market. Article on Private Investment Image 4.1.png 6.
Challenges in Fundraising
Despite the positive outlook, fundraising in the private markets has faced headwinds, particularly for first-time fund managers and mid-sized firms. Global macroeconomic conditions, including rising interest rates, have led to a more cautious approach among limited partners (LPs).
Outlook and Opportunities
For businesses looking to raise capital and investors looking for high-potential opportunities, the Indian private markets offer fertile ground for growth in the future. Investment opportunities will continue to be driven by the focus on digitalization, sustainability, and innovation. Due to continued momentum in the technology, consumer, and environmental, social, and governance (ESG) sectors, PE/VC investments in India may surpass $85 billion in 2024, according to projections. For companies looking to raise funds, this period presents a unique opportunity to align with investor interests in technology, consumer growth, and ESG principles. On the other hand, investors should take into account the changing dynamics of the market as well as emerging trends that have the potential to shape the future of their portfolios. At Evernile, we pride ourselves on our deep industry insights, strategic advisory, and innovative deal structuring capabilities. Our expertise makes us a trusted partner for companies seeking growth capital and investors looking to capitalize on India’s private market potential. Together, we can navigate the complexities of the market and unlock significant value in this complex landscape.
