India’s private equity market entered a more cautious and disciplined phase in 2025, with overall PE-VC investments declining 17 per cent year-on-year to $36 billion amid a sharp slowdown in large-ticket buyout deals, according to a report by the Indian Venture and Alternate Capital Association and Bain & Company.

The report said traditional private equity investments fell 33 per cent in 2025 as investors turned more selective amid valuation mismatches, tighter leverage conditions and geopolitical uncertainty. However, venture capital and growth investments continued to gain momentum, rising 18 per cent to $16.2 billion.

Despite the moderation in investment value, deal volumes increased around 10 per cent to nearly 1,700 transactions, indicating sustained investor interest in India. Average deal size, however, declined sharply by about 25 per cent as capital shifted toward smaller and mid-sized transactions. Deals below $100 million accounted for nearly 70 per cent of PE volumes in 2025, compared with around 50 per cent a year earlier.

Investors increasingly favoured domestically aligned sectors such as consumer and retail, and manufacturing and industrials, which benefited from resilient consumption, supply-chain diversification and government-led production-linked incentive (PLI) schemes. Consumer and retail investments surged 2.6 times year-on-year, while manufacturing and industrial investments rose about 60 per cent.

By contrast, sectors such as IT/ITeS and healthcare witnessed slower activity due to global technology spending weakness, tariff-related uncertainties and valuation concerns.

The report noted that investors are increasingly prioritising operational improvements and platform-building strategies over leverage-led returns. Buy-and-build approaches and bolt-on acquisitions are becoming more prominent, especially among mid-sized assets.

Fund-raising activity remained robust, reinforcing India’s importance within the Asia-Pacific investment landscape. Domestic capital formation strengthened significantly, with local funds now accounting for 50-55 per cent of active investors compared with 35-40 per cent for global peers.

Exit activity remained broadly stable, rising 3 per cent to about $34 billion in 2025, although investors increasingly diversified beyond public markets toward strategic sales and buybacks amid volatile equity markets.

Looking ahead, the report said India’s PE-VC outlook for 2026 remains “cautiously optimistic”, supported by moderating interest rates, stable inflation and resilient domestic consumption, though global liquidity tightening and geopolitical risks could continue to weigh on dealmaking.

Published on May 14, 2026