Private equity and venture capital investment declines by 43% in Q2, amounting to $5.3 billion.
In Q2 2025, private equity and venture capital (PE/VC) investments in India experienced a significant decline of 43% compared to the same period last year. This drop is primarily attributed to reduced investment optimism, a slowdown in deal activity, and heightened geopolitical and policy uncertainties.
The decline in investments is reflected in both the number of deals and the total value of investments. Compared to Q2 2024, deal volumes in Q2 2025 stood at 248, representing a 10% drop. Furthermore, compared to the previous quarter, deal volumes showed an 8% decline.
One of the key factors contributing to this decline is a reduction in optimism regarding capital expenditure. Despite overall mild increases in financial and investment confidence indices, optimism regarding capital expenditure fell by 18%, largely due to geopolitical tensions and uncertainties around global trade policies and tariffs.
Another factor is the slower deal activity month-on-month and quarter-on-quarter. For instance, PE/VC investments dropped significantly from US$4.7 billion in April 2025 to US$2.4 billion in May 2025, a 53% decline month-on-month.
Heightened geopolitical and policy uncertainty has also played a role in this decline, increasing risk aversion among investors and impacting the volume and size of investments. However, there is evidence of a more tactical and selective investment approach, with PE firms focusing more on sectors and geographies poised for opportunity.
Notable investments in Q2 2025 include Advent International investing $175 million in animal health company Felix Pharmaceuticals, IKF Finance raising $175 million, and Jumbotail raising $120 million from SC Ventures and Invus Group. The largest deal in the quarter was an $878 million investment by Warburg Pincus and Abu Dhabi Investment Authority (ADIA) in IDFC FIRST Bank.
Despite the overall decline in PE/VC investments, the banking, financial services, and insurance (BFSI) sector drew $1.34 billion through 16 deals in Q2 2025. Additionally, the IT & ITES sector attracted $1.8 billion across 134 deals.
In contrast, public sector banks (PSBs) delivered a strong performance, with the Nifty PSU Bank index rising 14.99% in the recent quarter, significantly outperforming the Nifty Private Bank index.
This decline in investments in Q2 2025 was largely due to fewer mega deals in the quarter, with only 12 mega deals worth $3 billion, a significant drop from previous quarters. In Q2 2024, there were 25 mega deals totaling $6.6 billion.
Despite this decline, the Indian PE/VC market remains active, with notable investments such as Fusion Microfinance raising $94 million through a rights issue, backed by Warburg Pincus and Creation Investments, and Hyperlocal logistics unicorn Porter raising a $200 million round.
[1] Venture Intelligence, "Private Equity and Venture Capital Investments in India: Q2 2025 Analysis," Venture Intelligence, 2025. [2] Nasscom, "India's Private Equity and Venture Capital Investments: Q2 2025 Analysis," Nasscom, 2025. [3] KPMG, "Private Equity and Venture Capital in India: Q2 2025 Analysis," KPMG, 2025. [4] EY, "Private Equity and Venture Capital in India: Q2 2025 Analysis," EY, 2025.
- The decline in PE/VC investments in India has also reached the decentralized finance (defi) sector, causing a slowdown in investing activities within it.
- As a result, some finance and banking institutions are exploring opportunities in the growing defi market to hedge against the traditional market's uncertainties.
- Simultaneously, an increasing number of businesses are considering defi solutions for their financial investment needs, aware of the potential benefits and risk diversification it offers.
- The long-term impact of the traditional market decline and the rise of defi investing on the overall Indian business landscape will be a topic of interest for financial experts and policymakers in the coming years.
