India's private capital market has seen its assets under management (AUM) grow at an impressive pace over the last five years, almost doubling to US$124.3 billion by the end 2023, according to data from Preqin.
The research house noted that the most populated country in the world is becoming a key destination for global limited partners (LP) attracted by its strong GDP growth, favourable demographics, large-scale infrastructure projects, and ongoing economic reforms.
Preqin revealed that the expansion of India-focused venture capital funds has largely driven the growth of private capital AUM in India, with VC now accounting for 36 per cent of the total private capital AUM in the country, up from just 14 per cent in 2010.
Namely, over the last decade, India-focused VC funds’ AUM have grown eightfold from US$5.5 billion in 2010 to US$44.8 billion by the end of 2023.
“India has long been a significant player in the global venture game,” writes Preqin senior writer Harsha Narayan.
“Its robust economic expansion and increasingly wealthy, young population continue to appeal to investors in the asset class,” Narayan explained.
She noted that while global macroeconomic challenges have triggered a more cautious sentiment among investors toward VC in recent years, negatively impacting deal activity in the country, India is still second only to greater China when it comes to deal value in APAC.
“Investors have adapted to the new environment by shifting their focus to high-quality assets and emphasising profitability, leading to renewed optimism about India’s long-term potential,” Narayan said.
Private equity, meanwhile, has come to the forefront in India in recent years, with India's private equity deals increasing from 141 in 2022 to 153 in 2023.
“In 2023, deal value stabilised at US$13.5 billion. This momentum has carried into 2024, with 67 deals totaling US$7.5 billion in the first half of the year,” Narayan said.
India-focused private debt funds are, however, experiencing “astounding” growth, she said, with AUM growing 26 times from US$700 million in 2010 to US$17.8 billion in 2023, far outpacing other asset classes in India, including VC (8x), private equity (2.1x), real estate (1.6x), and infrastructure (1.8x) over the same period.
“It has not only become a critical part of India’s private capital market, but has also established itself as a regional leader, with AUM surpassing all other markets in APAC in 2022, including its closest competitors, South Korea and Greater China, according to Preqin data,” Narayan said.
“This impressive growth has been driven by India’s urgent need for financing”.
She explained that many fast-growing mid-sized businesses are constrained by a significant funding gap, as local banks’ conservative lending practices often fail to meet their diverse capital needs.
“Private debt lenders are stepping in to fill this void, offering more flexible financing solutions that banks are unable to provide,” she elaborated, with regulatory improvements also said to have played a key role in the expansion.
India-focused real estate funds’ AUM has also grown steadily from US$12.7 billion in 2010 to US$21.3 billion by the end of 2023, while the infrastructure sector is similarly garnering increased attention, with high development needs attracting private capital inflows.
With a total deal value of US$14.1 billion by the end of 2023 and $9.5 billion from 77 deals in the first half of this year, India has maintained its position as the most active deals market for infrastructure in the APAC region, according to Preqin.
Namely, Preqin noted that New Delhi’s 2024–25 budget sets a capital expenditure target of US$133 billion, of which more than US$20 billion of this would be required from private capital players.
Some of the top investors, Narayan said, are globally prominent LPs, such as the Abu Dhabi Investment Authority, Temasek Holdings, and the CPP Investment Board.
“For many, the country is a key strategic component of their portfolios,” she concluded.
