No let-up in India's private market boom as investors continue to shun China

Business Times

17-07-2025

[SINGAPORE] A surge in the value of private equity (PE) deals signed in India in the first half of this year, coupled with the inking of the country's biggest private credit transaction, are adding fuel to a hot private market.
With investors still keeping away from China, traditionally the largest Asian private market, the strong growth in India, in contrast, has been drawing the likes of Temasek, BlackRock and EQT to their hunt for deals.
LSEG's data provided to The Business Times shows the value of PE or buy-side sponsor-backed mergers and acquisitions in India soared to US$11.7 billion in the first six months of this year. This was up 88 per cent from the same period in 2024, although the number of deals fell 25 per cent over the same timeframe, to 224.
Even with the near-doubling in the value of PE deals, and the record private-credit refinancing by conglomerate Shapoorji Pallonji Group, industry players see no sign of let-up in India's private markets. In fact, they say it will lead the charge in the Asia-Pacific for at least the next five years.
This is underpinned by the size of India's economy, its growth trajectory and the youth of its people.
The country has a one-billion-strong working population at a median age of 28 years; in 2030, an estimated 36 million families will be nearing the 'affluent' category, that is, earning an average annual income is around US$37,500, making the country one of the biggest growth drivers at Swedish buyout firm EQT.
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Hari Gopalakrishnan, partner and head of India at EQT Private Capital Asia, told BT: 'With the Indian economy close to US$4 trillion today, and the overall buyout volume last year was only about US$15 billion ... we still think it is under-penetrated.'
Citing the nine-fold growth in India's economy between 2000 and 2024, he said India's economy could expand to between US$8 trillion and US$15 trillion in the next decade or two, if it grows at an annual rate of up to 7 per cent.
India's buyout market remains 'under-penetrated,' says Hari Gopalakrishnan, partner and head of India at EQT Private Capital Asia.
Four jumbo deals
Four deals in the first half of this year were worth at least US$1 billion, including the largest insurance transactions seen in India.
Topping the list is German insurer Allianz's sale of its 26 per cent stake in Bajaj Allianz General Insurance and Bajaj Allianz Life Insurance for around US$2.8 billion to the Bajaj Group.
Another mega deal was global investment firm KKR's exit from its investment in JB Chemicals through a sale to Torrent Pharmaceuticals for US$1.4 billion in late June.
Apart from India's robust economic growth trajectory, industry observers also expect the country to continue receiving the capital that is avoiding China.
Beelee Seah, partner at Norton Rose Fulbright, said: 'Investors are re-allocating funds that historically have been deployed into China-focused investments, and India – along with some countries in South-east Asia – are benefiting from this 'China plus one' strategy. Soon enough, if not already, investors are looking at India as a core allocation, rather than an emerging-market allocation.'
While China remained the biggest PE market for the Asia-Pacific last year in terms of deal value, its growth was modest, and its market share continued to fall, Bain & Co said in a report in March. India was the region's top performer, notching a double-digit growth in deal value and count.
That finance and healthcare sectors are leading this first half's deals reflect the rise of India's middle class, along with their needs for financial planning and healthcare, industry players said.
Gopalakrishnan said: 'We've historically invested in tech services, healthcare, financial services, and we're looking to add more sectors while deepening our presence in these existing sectors.'
The frenetic pace of deal-making however, is leading investors and PE fund managers, known as general partners (GPs) to be wary of overvaluation.
Overvaluation concerns
In a May report citing a survey of 110 Asia-Pacific fund managers, Bain noted that 75 per cent listed high entry valuations as a key challenge or concern for India.
'We don't think India is a value buy...especially compared to other emerging markets,' said Vish Ramaswami, head of Asia-Pacific private investments at Cambridge Associates. 'It's a generally rich, fully-priced market, and there's a scarcity value for assets such as hospitals.'
Vish Ramaswami, head of Asia-Pacific private investments at Cambridge Associates, says India is a fully-priced market, and not a value buy relative to other emerging markets. PHOTO: CAMBRIDGE ASSOCIATES
In healthcare in particular, an industry observer said India's multiples are higher than those in South-east Asia, where they are at unprecedented levels of Ebitda multiples in their 20s. He was referring to earnings before interest, taxes, depreciation and amortisation.
But other industry participants disagree, arguing that the Indian market is big enough for investors to find deals.
Pallavi Gopinath Aney, partner and joint chair of India group at law firm A&O Shearman, said: 'There is always a risk of overvaluation in any booming market with multiple players competing for available assets, but in India overall, macroeconomic fundamentals have remained strong.'
The firm was the legal counsel to Mumbai International Airport's US$750 million financing by US-based Apollo finalised in June.
Pallavi Gopinath Aney, partner and joint chair of India group at law firm A&O Shearman, says India's private capital boom is underpinned by strong macroeconomic fundamentals. PHOTO: A&O SHEARMAN
In private credit, India has also been hogging the headlines. Apart from the Mumbai airport deal, there was the US$3.4 billion refinancing of local real estate and construction conglomerate Shapoorji, which is India's largest private debt transaction on record.
The zero-coupon non-convertible bonds offer an annual yield of 19.75 per cent paid at maturity of three years, to about a dozen investors. These include Ares Management, Cerberus Capital Management, Davidson Kempner Capital Management and Farallon Capital Management.
The terms reportedly include three layers of protection for creditors, with one raising concerns: Shapoorji pledging its stake in privately-held Tata Sons worth more than US$18 billion as collateral.
Since Shapoorji's holding in Tata Sons might not be transferable, there are questions that creditors may be relaxing their requirements to get into India's hot private debt market.
Declining to comment on the Shapoorji deal, Dinesh Goel, partner at Ares Credit Group, told BT: 'We are a decent distance away from a situation in which you would say there is too much capital chasing too few opportunities.
'That's where you see investors going in for risks that they should not have taken. But I don't think they are anywhere close to that.'
One point is undeniable: rising competition in the Indian private debt market. Apart from the attractive demographics and India's positive economic growth trajectory, creditor protection has also been enhanced since the country passed its first insolvency and bankruptcy code in 2016, said Andrew Tan, chief executive officer for the Asia-Pacific at Muzinich & Co.
'There's competition from both local players and foreign players,' said Tan, who is also head of Asia-Pacific private debt. The rivalry is more intense for loans to bigger companies, for which more funds are clamouring to participate.
That is where creditors are seeing returns fall, he added. On senior secured deals, investors could receive yields of between 10 and 12 per cent around four years ago. Now, it's in the 7 to 10 per cent range.
But given the size of the Indian market, Tan said there is 'still good value' in the core middle-market segments, where a company's Ebitda is between US$20 million and US$50 million.