Private equity inflows touch a record $27 billion in H1

Mumbai: Private equity capital flows to India reached a record $27.6 billion in the first six months of the year, nearly offsetting the $29 billion outflow in portfolio investments and demonstrating that the country's allure as a growth engine in the long term remains undiminished despite near-term disruptions caused by an unprecedented and unidirectional surge in dollar-denominated assets.

Private equity capital flows, via the foreign direct investment (FDI) route, are considered far more stable than money coming in as portfolio investments.

Investments by big-ticket private equity investors and venture capitalists rose 15.5% year-on-year, according to data compiled by Indian Venture Capital Association (IVCA). As many as 713 deals were signed between January and June compared with 526 in the corresponding period last year.

"Data reiterates that PE and VC flows come in response to India's long-term growth promise, improving governance frameworks and government-driven reforms making an easier and more predictable business environment," said Sanjay Nayar, senior advisor, KKR India. "PE and FII flows cannot be compared because they're two very different pools of capital. Globally the discount rates have changed but PE and VC funds are underwriting much robust longer-term growth rates for India for the reasons mentioned."

Reliance group-controlled Viacom received the largest investment of $1.8 billion from Murdoch-controlled BodhiTree Systems during the first half.

"The surge in private equity inflows points to growing popularity for risk-taking and new business models and tech tapping into venture capital and PE fund flows," said Karthik Reddy, chairperson, executive committee, IVCA and co-founder of Blume Ventures. "Fundamentally, this is the nation-building capital for decades to come."

Baring Asia's buyout of IGT Solutions and Bain Capital's investment in IIFL Wealth were among the notable investments. In another transaction, Welspun Enterprises raised $775 million from emerging market private equity firm Actis. Dailyhunt, a news aggregator, obtained $805 million from a group of investors including the Ontario Teachers Pension Plan and CPPIB.

"This reinforces that India's long-term story remains sacrosanct," said Utpal Oza, managing director and head of investment banking at Nomura. "Correction in valuations, increasing ESG investments and a slowdown in public equity markets have helped private capital inflows."

"Asia flows are now directed towards India gradually shifting from other parts of Asia," he said.

Companies that recorded stellar performance during the peak of IPO markets last year, fell drastically. Zomato, a food delivery company, was valued at $12 billion at the time of listing. Shares have fallen one-third from the issue price of ₹76. Shares of Zomato were trading at ₹53.65 apiece.

"While companies had to postpone initial or follow-on public offering plans this year amid uncertain market conditions, the flow of FDI to private continues to be strong, especially in the face of flight of foreign portfolio investors...," Reddy said.

LIC of India, the country's mega initial public offer was valued at ₹6.07 lakh crore versus ₹10 lakh crore estimated before the Russia-Ukraine military conflict. As of Friday, LIC's market capitalisation is at ₹4.36 lakh crore.