India’s private equity industry is seeing an increase in buyout opportunities as a growing pool of mature assets looks to professionalize operations and accelerate growth, speakers at the Mint India Investment Summit held on 26-27 said. March in Mumbai.
“If you think about the investments we make on the buy-side, we typically bet on an attractive macro theme and a good competitive position that we can build. We feel there are a few things that need to be done in the business to unlock value,” said Ashish Kotecha, partner at Bain Capital.
“While it varies by company or investment, we do initiatives around cost, cash and pricing. Part of that is M&A, which is an important tool as a platform or key in an acquisition to acquire a new customer or a market segment that you don’t have exposure to. That accelerates the path to value creation, and M&A is a key part of that,” he said, adding that the firm also spends significant time considering the right home.
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Bolt-ons typically allow larger firms, usually backed by private equity firms, to buy smaller businesses to expand operations, diversify offerings or reach new markets.
Capital as a commodity
For good companies with strong fundamentals, capital is increasingly becoming a commodity amid expanding global money supplies.
“They are asking a lot more from equity partners, how they can add value during the investment journey,” said Mayank Bajpai, partner at TPG Growth and Rise.
EQT, which started buyouts in India in 2013, said more founders are open to handing over control to institutional investors.
“We still think we’re scratching the surface. I still think buyouts will grow a lot more than in the past. Even in terms of talent, we’ll get a lot more executive talent who say they want to work in private equity. Talent is moving towards private equity and will continue to grow as a source of talent for buyouts,” said Hari Gopalakrishnan, partner and deputy global head of EQT India and Services Asia.
However, buyouts may remain limited in the next-generation segment, where first-generation entrepreneurs may resist ceding control.
“In such cases, private equity can still be minority investors. But when these founders decide to move on to other things, buyouts can open up here as well,” Gopalakrishnan added.
Sector bets
“I think while (buyouts in) financial services, healthcare, continue, we will see a lot of investment going forward in the whole AI space,” noted Vikram Raghani, partner, JSA Advocates & Solicitors.
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For private equity firms, the return on capital has become as critical as its deployment.
“Pension funds and insurance companies have been very risk-averse, so capital protection is very important to them. As a result, most of the buyout capital goes to businesses that have appeared to be downside-proof, delivering regular returns over time, and so at some level established businesses naturally gravitate towards that,” Gopalakrishnan explained.
A vibrant capital market is equally important for permanent exits.
“But I also realize that if you buy 100% of a company, it’s also not easy to sell all the way down. But as the market matures, over time that will happen and we’ll see more private equity firms take the company from 100 to zero,” he said.
Liquidity instruments
New fund structures are emerging to ease liquidity pressures. In 2024, ChrysCapital closed its largest follow-on fund to date at $700 million anchored by HarbourVest Partners, LGT Capital Partners and Pantheon Ventures to remain invested in India’s national stock exchange.
Continuation funds allow limited partners to exit while allowing firms to remain invested in high-performing assets outside of the typical fund cycle.
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“I think in the future you’ll see more instruments to continue on individual assets depending on how strong that one asset is. There are other companies in our portfolio right now that could eventually be standalone assets. We’ll take that challenge when that happens,” said Saurabh Chatterjee, chief executive of ChrysCapital.
ChrysCapital, which closed its tenth fund last year with a corpus of $2.2 billion, has indicated that nearly half of the capital will be deployed in control-oriented buyout opportunities.
Chatterjee cautioned that constructing a portfolio for follow-on vehicles requires discipline.
“GPs get into trouble when they try to do a multi-asset CV and then put in non-standard assets with one or two zero assets. In those cases, LPs don’t appreciate it because a bad asset reduces the value of the overall portfolio,” he added.
As India’s capital markets deepen and founders become more open to controlling deals, private equity firms appear poised for a wider cycle of buyouts – fueled by screw-ups, sector expansion and evolving liquidity structures.
