Private equity (PE) deals in India have been on an even keel this year and looks set to just about top 2023 numbers, while mergers and acquisitions (M&As) have seen a spike late in the year due to a couple of large deals, and primarily domestic transactions.

Despite higher pricing and secondary market valuations spilling over into the private markets as well, the activity in both PE deals and M&As is expected to retain momentum, though fund-raising could be a challenge for smaller firms.

In the 11 months of 2024, total deals, including PE and M&As, has been of the order of $64.7 billion, according to Grant Thornton Bharat data. This is 22 per cent higher than in entire 2023. Grant Thornton expects the deal activity to be subdued in the current month with deal closures being pushed to 2025.

Private equity

“It’s a robust market from a volume or numbers perspective,” said Aalok Shah, Managing Director, Co-Head of India, Rothschild & Co. “People are actively evaluating transactions, and we are aware of multiple transactions which will come to the market in the new year.”

A dominant theme in 2024 was a number of PE firms, owning or controlling companies, tapping the capital markets for their portfolio firms. “A lot of PE-sponsored companies have gone for listing this year taking advantage of the capital market and their valuations,” Shah said.

A major theme that has been going on for a while and has become almost a norm, especially with the larger global PE firms, is control transactions. “I think global firms have realised that control works better in India,” said Gaurav Sharma, Head of India Investment Business, Investcorp, adding that any largish deal with a profitable business and a good track record, “and there’s a possibility of a control, that trend and that deal flow is strong.”

Another theme that has played out is exits at good valuations, whether to other PE firms or to strategics.

PE firms have also been actively involved in investing in companies to either increase their stakes or take new exposure. Shah pointed out that newer funds have entered the Indian market such as Vitruvian Partners and Permira, testifying to the interest in the Indian markets.

Global liquidity is in a squeeze and there is lesser allocation of capital to Asia and emerging economies, but larger PE firms are finding it relatively easier to raise funds though smaller and mid-sized funds are struggling to raise new funds from their LPs (limited partners). But there are some bright pockets here as well.

A cautionary note was struck by Sharma who said that general partners (GPs) in India were finding it difficult to raise capital for a fund. He also said that due to this a majority of the deals would continue to be minority deals. “Not everyone in the mid-market is looking at buyouts.”

Mergers & Acquisitions

During the year, financials dominated the M&A activity followed by industrials, high technology, materials and healthcare, but domestic and outbound activity have been higher compared to inbound activity.

Larger Indian groups are fairly active; they’re always looking out for good opportunities to consolidate and increase their market share, said Shah. He pointed out that on an overall basis, M&A activity from strategics has been lower compared to buyouts by PE firms.

Pharma, healthcare, infrastructure and renewables as well as business services are expected to be trending themes in 2025.

Published on December 18, 2024