India Emerges as Top Destination for Global Private Equity Funds in Asia

India has solidified its position as the most attractive destination in Asia for global private equity funds, according to Eric Janson, the Global Private Equity Leader at PwC. In an interview with Ashwin Mohan on April 26, 2024, Janson highlighted the key factors driving this trend, including India's large population, GDP growth exceeding 6%, and the expanding middle class.

Janson revealed that many PwC clients are planning to allocate more funds towards India, with deal volumes anticipated to increase five times by the end of the decade, a growth rate unmatched by other countries. He also discussed the emerging trend of private equity firms seeking to acquire rival firms, consulting arms, and investment banks to increase assets under management and gain efficiencies across multiple sectors.

The optimism surrounding India's private equity landscape is further evidenced by the recent success of India-focused private equity firm Kedaara Capital, which raised a $1.73 billion fourth investment fund, surpassing Chrys Cap's $1.3 billion Fund IX raised in 2023. Nearly 85% of Kedaara's new fund was sourced from existing investors, including major Canadian pension funds and German insurer Allianz. The capital will be invested across sectors like banking, healthcare, consumer, and SaaS, with Kedaara looking at both minority stakes and complete acquisitions.

Why this matters: India's emergence as the top destination for global private equity funds in Asia underscores the country's growing economic prominence and the confidence of international investors in its long-term growth potential. This trend is likely to have significant implications for the Indian economy, as increased private equity investments can drive innovation, create jobs, and support the growth of domestic businesses.

The shift in private equity focus towards India comes amid China's capital outflows and evolving geopolitical dynamics. India's share of Asia-Pacific private equity deals has surged to 23%, while China's share has declined to a nine-year low of 31%. Despite global macroeconomic headwinds, India continues to see investors raising funds in droves, with 126 funds launched in 2022 that raised over $18 billion for startup investments.

Private credit is also emerging as a major source of finance for projects in India, as entrepreneurs seek short-term debt to bridge the funding gap due to differences in pricing for equity dilution. Bhavin Shah, Partner & Leader of Private Equity and Deals at PwC India, stated that several large credit funds have started investing billions of dollars in Indian companies, both in stressed and performing credit spaces.

The first quarter of 2024 saw a resurgence in deal-making activity in India, with a 24% increase in deal volume compared to Q4 2023. The total deal value reached $25.6 billion, a 33% increase from the previous quarter and 30% higher than Q1 2023. Dinesh Arora, Partner and Leader Deals at PwC India, commented on the robust activity, stating,

Key Takeaways

• India is the most attractive PE destination in Asia, driven by large population, GDP growth, and expanding middle class.
• PE deal volumes in India expected to increase 5x by 2030, outpacing other countries.
• Kedaara Capital raised $1.73B 4th fund, with 85% from existing investors like Canadian pensions and Allianz.
• India's share of Asia-Pacific PE deals surged to 23%, while China's declined to 9-year low of 31%.
• Private credit is emerging as a major funding source for Indian companies, both stressed and performing.