Investment Trends: Private Equity/Venture Capital financing increases with bigger deals; Mergers and Acquisitions recovery
In the week ending August 14, the Indian private equity and venture capital market experienced a significant surge in funding, with a total of $371 million secured by startups. This marked a near doubling of cumulative funding compared to the previous week, a trend primarily driven by a handful of large-ticket deals.
One of the notable deals was the buyout of Theobroma by ChrysCapital, which expanded the firm's consumer portfolio. However, the funding for six other startups, including Kimirica, Dashverse, and Elivaas, was not part of the total $371 million. The exact amount of funding secured by these startups was not specified.
The funding growth was observed despite the truncated trading period due to Independence Day on August 15. Despite this disruption, the private equity and venture capital funding momentum continued for the second consecutive week.
The strengthening of the private equity secondaries market in India is being driven by several key factors. There is a growing trend in GP-led secondaries, especially continuation funds, which are gaining importance in the buyout market. These continuation funds extend ownership of portfolio companies, offering investors new avenues for value creation and resilience.
Another factor is the increased focus on liquidity and portfolio management. Limited partners (LPs) use the secondaries market to manage liquidity and rebalance portfolios, addressing issues like the “denominator effect,” where their private asset allocation surpasses target ranges.
Lower mid-market companies, which form a significant portion of Indian PE investments, present greater potential for value creation through operational improvements and expansion, making these attractive in continuation funds and secondary deals.
Changing exit dynamics amid a challenging macro environment are also encouraging sponsors to explore secondaries, continuation vehicles, and other liquidity solutions for portfolio revitalization.
Robust overall PE/VC investment activity in India continues to support a growing private equity ecosystem that underpins secondaries market activity. While overall PE/VC deal volumes have shown some volatility, India continues to attract significant investment, supporting the strengthening of the private equity secondaries market.
Finally, more permissive policy environments allow PE firms in India to pursue add-on acquisitions and strategic combinations that increase portfolio value, indirectly boosting secondary market activity. These favorable policy and regulatory conditions contribute to the ongoing growth and strengthening of the Indian private equity and venture capital market.
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