Private Equity in India: a path of progress

The Indian Government has consistently strived to create a nurturing environment for new and growing businesses. The introduction of the Goods and Services Tax was one such drastic reform which created a uniform tax infrastructure and brought semblance as well as created a wider tax base for the country.

The improvement in the economic sector also impacted the infrastructure and financial sector which in turn drastically helped in increasing the M&A activity in the country to $77.6 billion (an increase of 53.3%). It also gave an impetus to Private Equity deals which reached a whopping $24.4 billion. This change has led to more confidence in investors which can be witnessed in India’s improved rank in the World Bank’s ‘ease of doing business’ index. Today the country is among the top 100 countries for investments.

India has been a preferred investment destination all through 2017 and the trend continues in 2018. The country recorded a total deal value of $26.4 billion in the last year; which is the highest in the last 10 years. This was an increase of 60% in deal value in comparison to the last year. The industries which contributed to this growth included consumer tech and banking, financial services and insurance sectors aggregating to more than 50% of the entire deal value in 2017. Some of the biggest deals in this respect were Flipkart, Ola Cabs and Paytm. Driving the investment sector in the country, these deals were instrumental in creating a conducive environment in the country.

As the number of active players in Private Equity increased, especially institutional investors; it also led to an increase in the number of interested players in the market from 474 in 2014-15 to 491 during the 2015 – 16 period. The trend of rising private equity has also given rise to the number of participating funds thus drastically increasing competition. Among the competition, one can see a rise in LPs investing directly in the Indian Market. Even though the trend seems to be positive, it is forecasted that this year, ie 2018 will see a slow-down in this sector.

As the Government continues to build a more secure and transparent financial infrastructure in the country, one can expect a rise in domestic as well as foreign business activities this year. 2018 has had a promising start and one expects private equity will continue to grow while the government continues to strengthen the framework through policies and reforms.

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