India’s PE/VC market poised for record growth in 2025 amid strong deal momentum and sectoral shifts

India's private equity and venture capital (PE/VC) outlook for 2025 remains positive, supported by strong deal activity in 2024 and a favourable macro environment, despite a challenging and uncertain year ahead, according to EY's PE/VC Agenda: India Trend Book 2024 report.

The strong momentum has already begun, with January’s investments 37% higher than in December 2024, despite a 9% dip compared to January 2024, the EY report—released at the Indian Venture and Alternate Capital Association (IVCA) Conclave 2025 in Mumbai—highlights. "As volatility in mid-cap and small-cap indices declines, we anticipate increased deal activity and closures," the report states.

The recent market correction, however, signals more balanced conditions ahead, reinforcing India's attractiveness as a leading PE/VC destination, it adds. "International General Partners (GPs) will continue to shape the landscape, while the pullback in the startup segment presents unique opportunities, particularly in Tier 2 and Tier 3 cities, known for their untapped markets and cost advantages."

In 2024, despite global challenges, India recorded its second-highest-ever investment inflow of $56 billion, driven by an all-time high in deal volume, with 1,352 deals—a 54% year-on-year surge.

Despite geopolitical uncertainties, currency depreciation, stretched valuations, and market volatility, India's economic resilience has driven an increase in PE/VC activity, says Vivek Soni, Partner and National Leader for Private Equity Services, EY India. "The 2024 PE/VC activity—marked by rising investment volumes and exits—underlines investor confidence in India's growth trajectory, with sectors like infrastructure, real estate, e-commerce, technology, and financial services leading the way."

As per Soni, as India navigates the challenges and uncertainties of 2025, its GDP growth, political and policy stability, favourable macro environment, and the quality of Indian entrepreneurs will continue to offer opportunities for long-term investors. "The declining interest rate curve, combined with corrections in public market valuations, will hopefully reduce the bid-ask spread in private deals and lead to an increase in the value and volume of PE/VC deal closures."

The surge in buyout transactions and private credit investments signals a shift towards long-term value creation and strategic growth, says Rajat Tandon, President, IVCA. "At the same time, the rise of new sectors—driven by innovation and sustainability—underscores the expanding horizon of investment opportunities."

The road ahead will be shaped by collaboration, policy certainty, and the ability to harness emerging opportunities in a rapidly changing world, Tandon adds.

Key trends observed in 2024

Rise in investments: PE/VC investments saw a 5% year-on-year increase in 2024, driven by a surge in buyout investments, particularly in the infrastructure, technology, and financial services sectors. The number of deals experienced a significant 54% year-on-year growth. While buyout, startup, and credit segments experienced an increase in value terms, growth and PIPE investments declined compared to the previous year.

Shift in investment approach: A resurgence was observed in pure-play PE/VC investments, which saw a 10% year-on-year increase. However, PE/VC activity in the infrastructure and real estate asset classes declined by 3% year-on-year.

Churn in sectoral allocation: Infrastructure was the leading sector, attracting $12.1 billion in PE/VC investments. Among the traditional favourites, financial services, e-commerce, and technology recorded growth, whereas life sciences experienced a year-on-year decline. The real estate sector witnessed a record high of $8.8 billion in investments.

Increase in PE/VC exits: PE/VC exits surged to the third-highest total on record at $26.7 billion, across the second-highest-ever number of exits, with 282 deals. Exits via the open market dominated this year’s exit activity, reaching an all-time high of $12.9 billion and accounting for 48% of overall exits.

Decline in fundraising activity: Fundraising activity declined in 2024 to $10.4 billion, down from $15.9 billion in the previous year. The number of fundraises also dropped to 95 from an all-time high of 102 in 2023.

PE/VC investments by sector

The key sectors that saw significant private equity and venture capital investment activity in 2024 included infrastructure, financial services, real estate, e-commerce, technology, and life sciences. These sectors recorded more than 100 deals each, compared to just two sectors reaching this milestone in 2023. Together, they accounted for 80% of total investments by value and 66% by deal volume. "Like last year, 2024 also witnessed 12 sectors receiving over $1 billion in investments."

Among all, the infrastructure sector maintained its dominance and, as in the previous year, remained the top-performing sector. In 2024, the real estate and financial sectors swapped positions—real estate, which held the second spot in 2023, slid to third, while the financial sector moved up from third to second. The technology sector, previously ranked fifth in 2023, climbed to the fourth spot. Traditionally favoured sectors such as e-commerce, technology, and financial services grew by 87%, 56%, and 41%, respectively, the report states.