India remains a hotbed for private equity deals in 2025 as foreign funds lead big-ticket investments: Khaitan & Co Survey

Time of India

4 days ago

Khaitan & Co reports that India's PE/VC market showed strength in 2024 and early 2025. Infrastructure, technology and financial services were active sectors. Large deals increased, with foreign funds playing a key role. Investors favored minority stakes. Open market exits and PE-backed IPOs gained momentum. ESG considerations grew. The Singapore International Arbitration Centre was preferred for dispute resolution.
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Despite global economic uncertainty and a slowdown in deal activity worldwide, India's private equity (PE) and venture capital (VC) market continued to display remarkable resilience in 2024 and early 2025, according to a report by law firm Khaitan & Co. The third edition of its proprietary survey, What's Market in Indian Private Equity Deals, reviewed over 440 transactions handled by the firm over the past 3.5 years.Shared exclusively with The Economic Times, the report highlights that sectors such as infrastructure, technology, financial services, warehousing-led real estate, healthcare, and energy were among the most active areas for PE/VC investments. The report also noted a surge in large deals, with transactions valued at over $1 billion constituting 24% of the total deal volume, while 44% of deals were above $200 million.'While the global investment climate has seen its share of headwinds, India's private equity (PE) market has defied the trend—surging ahead with strength, resilience, and momentum. Backed by a robust capital market and sustained investor interest, India stood out as a key investment destination, attracting strong PE/VC interest,' said Shantanu Gupta, Partner, Khaitan & Co.'Sectors like energy, infrastructure, financial services, technology, and real estate saw strong inflows.'Interestingly, majority stake transactions remained limited to just 12% of the deals, with 88% being minority investments. This trend, according to the report, reflects both promoters' continued interest in retaining control and investors' preference for strategic, long-term bets with operational influence.Exit activity also gained momentum, buoyed by a surge in open market exits and PE-backed IPOs. Global investors reaffirmed their confidence in India, with foreign funds accounting for the majority of the deal value in early 2025—up from the previous year,' said Gupta.Foreign capital played a dominant role, with offshore funds contributing a majority share of deal value in early 2025. The report also points out that India's elevation as the fourth-largest global economy, overtaking Japan, along with deeper capital markets, has further cemented its attractiveness for financial sponsors.In terms of investment structures, the report noted increasing adoption of locked box constructs (seen in 18% of transactions) and a steady preference for 'best efforts' covenants and higher diligence standards during interim periods. Pro-sandbagging clauses and robust ABAC (anti-bribery) and AML (anti-money laundering) warranties with extended survival periods also featured prominently.Another emerging theme is the heightened sensitivity toward ESG (environmental, social and governance) considerations. Though not quantified in the report, legal practitioners flagged ESG as an evolving investment filter among global PE houses operating in India.The arbitration-friendly climate also stood out. Nearly all agreements (96%) incorporated arbitration clauses, with the Singapore International Arbitration Centre (SIAC) emerging as the preferred seat, reinforcing investor comfort in enforceability and dispute resolution.'India's PE/VC investment outlook remains cautiously optimistic, underpinned by solid GDP growth, moderating inflation, and supportive policy measures such as interest rate reductions and targeted tax incentives to boost private consumption,' said Gupta. 'Investor appetite is expected to remain strong in financial services, healthcare, infrastructure, energy and real estate, while the consumer and retail sectors are poised for a rebound as consumption trends improve. Nonetheless, ongoing global trade tensions and geopolitical tensions continue to pose a potential risk to the broader investment climate,' he added.