Bhavesh Shah, Investment Banking Head at Equirus, feels that PE deals will go up in 2025 and M&As will be driven by need for domestic consolidation. Excerpts:

What are the themes that are playing out now in the PE space in terms of fund raising and transactions?

A good amount of money is being raised by the PE funds because a lot of funds have been able to get some good exits through IPOs. So, LPs are now looking at this asset class as they can invest in companies which will potentially go for an IPO maybe two-three years down the line. Some of the funds that we have been talking to, the amount of money that they have been able to raise is amazing. Small funds are talking now about ₹500 crore, ₹1,000 crore, ₹2,000 crore.

In my view, 2025 will be a year where the PE deal amounts will go up significantly compared to what has happened in the last two-three years. The funding winter is getting recalibrated, and now I think 2025 is an inflection point where it will start going up again.

Which are the sectors that will attract funds?

Consumer, pharma, healthcare and business services, including financial services, will be some of the fields which will continue to attract a lot of capital. These are the sectors where we have seen a lot of investor interest coming in. But a new dimension to this is also going to be industrial. Differentiated manufacturing businesses can also start getting some of the capital. India has been, for the last two-three decades, a country which has been growing on the basis of services. The next two-three decades could come from manufacturing.

It’s interesting that you should say that smaller funds are able to raise capital easily. I have heard the smaller firms are finding it difficult to raise funds from LPs.

No, I wouldn’t think so. It may be a very fund-specific situation. There is a lot of money coming in. Specific situations will always be there because of whatever reason, but I think there’s more money that’s going to be there.

On the M&A side, we have seen tepid activity mostly. Do you think that will pick up?

I think so. The reason it is not happening is because a lot of foreign players want to invest in India, but they are struggling with their valuations globally and the opportunities in India are available at a higher valuation. When it comes to domestic companies, they can add that sliver of consolidation in the Indian market, which is why the M&A will pick up.

Published on December 18, 2024