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Indian Equity Market – An ultimate value investing market


  • Investment: Continued Momentum
  • Fund Raising: No lack of capital for good deals
  • Exits: A record year

Investment: Continued Momentum

India remained a hotbed for dealmaking in 2018. Investment momentum was robust for a second consecutive year, with a total investment of $26.3 billion from approximately 793 deals during the year. 

Bain PE deals database
Source: Bain PE deals database.
Bain PE deals database.
Source: Bain PE deals database.

While the deal volume was higher than in 2017, the average deal size was flat. The result was a small decline in total investment value, which still was the second-highest in the last decade.

Consumer tech and BFSI remain the largest sectors for investment by value / and contributed about 40% of the total deal value in the year.

Bain PE deals database
Source: Bain PE deals database.

Note: Includes only deals of more than $10 million.

While consumer tech investment was still large at $7 billion, it shrank from more than $9 billion in 2017. 

Bain PE deals database
Source: Bain PE deals database.

Over the last couple of years, the sector has staged a resurgence of sorts, with clear winners emerging in such sub-sectors as horizontal e-tailing (Flipkart), vertical e-tailing (Bigbasket, Lenskart, Pepperfry), food (Zomato, Swiggy) and travel/hospitality (OYO Rooms, Ola). As a result, over the past few years, we are seeing fewer but higher-quality deals in consumer tech, with investors backing winners to scale further.

The other sector to remain dominant is BFSI, which attracted almost $5 billion of investments in 2018. As in previous years, BFSI investments were fuelled by deals in banks as well as a rising class of NBFCs that continue to flourish in the ecosystem.

Competitive intensity in the market continues to increase with a growing number of funds. Active players in India increased to 491 funds from 2015–17. Consequently, investors believe that competition has increased, with local and global PE firms viewed as the biggest competitive threats.

AVCJ – Asia private equity and venture capital intelligence
Source: AVCJ – Asia private equity and venture capital intelligence.

The average deal size in 2018 was flattish. 

A decrease in small-ticket deals of less than $25 million exerted upward pressure on the average deal size, but the average size decreased for transactions greater than $100 million. 

Furthermore, the average deal size in consumer tech declined by approximately 30%. This was primarily due to the absence of large “Flipkart-Esque” deals (such as SoftBank’s investments of $2.5 billion in Flipkart and $1.4 billion in Paytm) that pushed up the average size in 2017.

The top 15 deals constituted about 40% of the total investment value in 2018. This is similar to the previous year when the top 15 deals made up 50% of the total value. 

Bain PE deals database
Source: Bain PE deals database

Clearly, most funds are valuing quality over quantity, and dry powder is not being allowed to pile up. 

The number of larger deals (greater than $50 million) increased in 2018 from 2017, though their average size came down marginally. 

Notable large investments in 2018 included investments in HDFC Bank, Star Health and Allied Insurance, Swiggy, OYO Rooms, Paytm and Byju’s.

As in previous years, the total share of late-stage investments and buyouts increased, with an increase in majority deals as well. These featured a few large individual buyouts like Star Health and Allied Insurance ($930 million) and Prayagraj Power Generation Company ($830 million).

Bain PE deals database
Source: Bain PE deals database.

In the coming months, funds expect further investment activity in BFSI and consumer/retail, even though the valuations are still perceived to be high. 

Healthcare is another sector of rising interest, with funds looking at players across the spectrum—pharmaceuticals, equipment, single-specialty hospitals and clinics, diagnostics and others. 

Interest in technology and IT will be largely driven by rapidly growing enterprise tech (SaaS) companies that operate out of India and sell globally.

Key Points:

  • Private equity deal volume in India rose the second straight year, and while the average deal size declined slightly from the prior year, the total value of $26.3 billion in 2018 was the second-highest of the last decade.
  • The top 15 deals constituted about 40% of total deal value, demonstrating that most funds are valuing deal quality more than quantity. The number of deals greater than $50 million increased from the previous year. 
  • The consumer tech and banking, financial services and insurance (BFSI) sectors represented about 40% of the total deal value. Overall value declined for consumer tech, which has seen fewer but higher quality deals in recent past years. BFSI investment was concentrated in banks and the rising class of non-banking financial companies.
  • The number of participants funds continued to grow, and investors expect local and global PE firms to provide the biggest competitive threats in 2019. 
  • Over the next few years, investors see attractive opportunities in financial services and consumer/ retail, even though valuations are perceived to be high. Interest is also strong in healthcare and technology.         
Bain private equity survey 2019
Source: Bain private equity survey 2019.

Fund-raising: No lack of capital for good deals 

The global PE industry raised $714 billion from investors during the year, the third-largest amount on record—bringing the total capital raised since 2014 to $3.7 trillion. Buyout funds continued to draw the biggest share of capital, but investor interest during this record stretch has been broad and deep, benefiting a variety of funds.

Investors looking for diversification continue to be drawn to Asia-Pacific’s relatively healthy long-term growth profile.

However, after a few strong years, fund-raising has slowed across the region. Only 14% of funds raised globally were focused on Asia-Pacific in 2018, compared with 23% in 2017. 

Preqin – Private market, data set, and tools
Source: Preqin – Private market, data set, and tools.

Note: Includes regional and country funds; excludes real estate and infrastructure.

This decline in fund-raising largely reflected the Chinese government’s decision to tighten rules on PE investment, which is part of an ongoing effort to rein in debt and reduce financial risk.

However, India-focused dry powder remains healthy at $11.1 billion, indicating that high-quality deals are not lacking capital.

Preqin – Private market, data set, and tools
Source: Preqin – Private market, data set, and tools.

Note: Value excludes real estate and infrastructures; figures as of December each year; capital for India also includes regional allocations by global and Asia-Pacific-level funds. 

New asset classes like AIFs and distressed-asset management have further grown in the Indian market, aided by government regulations and tax breaks. 

Funds raised by AIFs more than doubled from approximately $2.4 billion in 2016 to approximately $5.5 billion in 2017, and are estimated to have exceeded $7 billion in 2018. The number of AIFs registered in India almost doubled from 268 in 2016 to 518 as of February 2019.

SEBI – Securities of exchange board of India
Source: SEBI – Securities of exchange board of India.

Note: Annual funds include only incremental funds raised in the period; 2018 data to 12 months; Category I invest in startups or early-stage ventures, social ventures, SMEs, infrastructure or other areas that the government or regulators consider socially or economically desirable; Category II includes AIFs that do not fall into Category I or III and do not undertake leverage or borrowing except to meet day-to-day operations; Category III includes AIFs that employ diverse or complex trading strategies and may employ leverage, including investment in listed or unlisted derivatives. 

Fund-raising will continue being a key priority for most investors in India, although most expect it to become more challenging in the next 12 months.

Bain Private Survey 2019
Source: Bain Private Survey 2019.

Key Points:

  • India-focused dry powder remained healthy at $11.1 billion, the second-highest level of the past decade. 
  • Throughout the Asia-Pacific region, however, PE fundraising slowed in 2018, largely reflecting the Chinese government’s tighter restriction on PE investments. 
  • Alternative investment funds have become an important source of capital. Funds raised by Alf’s more than doubled from 2016 to about $5.5 billion in 2017 and exceeded an estimated $7 billion in 2018. 
  • A majority of investors believe the fund-raising environment in the next 12 months will make it more difficult to source attractive deals.     

Exits: A record year 

An excellent year for exits signaled investor confidence in the Indian ecosystem and healthy public markets. Exits have increased consistently in the last two years and totaled 265 exits valued at nearly $33 billion in 2018. Almost half of this exit value resulted from the Flipkart sale to Walmart. However, even excluding the Flipkart exit, 2018 was one of the best years for exits in the last decade.

Bain PE deals database
Source: Bain PE deals database.

Note: Includes real estate and infrastructure exits; no filter on exit value has been applied to the overall figures.

Exits increased in most sectors, with consumer tech, IT and ITES, and BFSI as the primary contributors to exit values. A few large exits dominated in 2018, with the top 10 exits accounting for 70% of total exit value. Apart from Flipkart, these included Intelenet Global Services Pvt. (Blackstone), GlobalLogic (Apax), Star Health and Allied Insurance (multiple funds) and Vishal Retail (TPG).

Bain PE deals database
Source: Bain PE deals database.

Note: The total deal value of Ostro Energy estimated at $1.5 billion to $1.6 billion.

The public market remained the most preferred mode for exits—though there was a spike in strategic exits, primarily driven by consumer tech. Over the last five years, funds have made reasonable returns across most sectors, with consumer tech, IT/enterprise tech, and BFSI having the highest multiples on invested capital.

Bain PE deals database
Source: Bain PE deals database.
Bain PE deals database
Source: Bain PE deals database.

Note: Molc = ( distributions + unrealised value)/ paid-in capital; simple average of MolCs available for about 30% of exits from 2012 – 18.   

Top-line growth and cost and capital efficiency are expected to be the biggest creators of future value, according to our survey of investors. Exits which haven’t been as successful have been attributed primarily to management issues and macroeconomic headwinds. Keen buyers and strong management teams stood as major contributors to successful exits. A majority of our survey respondents felt that net returns in the next three to five years will stay in the same ballpark as today.

What is the biggest driver of returns on deals you exited? How do you see things changing in five years?  

Bain Private Equity Survey
Source: Bain Private Equity Survey.

Given how India’s economy is poised for growth in the coming year, and with capital markets on an upswing, many more exits are expected during the next few months. However, rising valuations and interest rates continue to pose concern for most investors.

Bain Private Equity Survey
Source: Bain Private Equity Survey.

Key Points: 

  • Exits have increased consistently in the last two years in India, with 265 exits in 2018 valued at nearly $33 billion. Even excluding the $16 billion Flipkart sales to Walmart, it was one of the strongest years for exits in the last decade. 
  • Consumer tech, IT, IT-enabled service, and BFSI were the biggest contributor to the exit values. The 10 biggest exits accounted for 70% of the total exit value. 
  • Most sectors have earned a reasonable return on exits over the past five years, with consumer tech, IT/enterprise tech, and BFSI reaping the highest multiples on invested capital. 
  • Investors attributed successful exits to strong management teams and keen buyers. Management issues and macroeconomic headwinds were cited in exits that weren’t so successful. 
  • Over the next five years, investors believed that top-line growth and cost and capital efficiency will be the biggest value creators for deals they exit. Investors generally expect small to moderate changes in net returns over that period.   


Private equity in India enjoyed an excellent year in 2018. Growth momentum continued, with investment value reaching the second-highest level of the last decade. While the usual sectors such as banking, financial services and insurance (BFSI) continued to grow, investments also spurted in varied sectors like consumer/retail, healthcare, and energy.

One primary way to assess investor confidence in a market is to look at exit momentum and how it is trending. In that regard, the Indian PE market performed very well, with the highest exit values in the last decade. This was led by the $16 billion Flipkart sale to Walmart, but exit momentum was high even excluding that event. Consumer technology, IT and IT-enabled services (ITES), and BFSI drove most of the exit values in the last year.

I believe there is sufficient India-focused dry powder to ensure high-quality deals don’t lack capital. I surveyed and identified BFSI, consumer/retail, and healthcare as attractive investment sectors in the future. Consumer tech will also continue to see investments into scaled players. Going forward, funds believe that cost improvement and capital efficiency will become an even more important driver of returns. While most surveyed funds believe that returns will remain about the same, they continue to be concerned about high (and increasing) valuations and rising interest rates.


CEO & Editor
I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as,, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.


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