Expert Insights: Indian Private Market Outlook 2025
New age businesses and the startup ecosystem are expected to drive the growth of private credit and private equity in India, according to industry experts.
Private CapitalVenture CapitalPrivate EquityPrivate DebtEconomic GrowthReal EstateJan 19, 2025
Sustained entrepreneurial activity, robust domestic consumption, and a vibrant startup ecosystem are the key drivers of private market growth in the coming years.
However, global macroeconomic pressures and regulatory uncertainties will test the resilience of the sector.
Anunaya Kumar, President, Sales & Distribution at 360 One Asset, Bhavdeep Bhatt, CEO of Northern Arc, Kalpesh Dave, Deputy CEO of Bajaj Capital, Lakshmi Iyer, Head of Fixed Income at Kotak Mahindra AMC, and Sharad Mittal, CEO of Arnya Real Estates, share their insights on the outlook for 2025 in the private market.
Venture Capital and Private Equity Markets
Anunaya Kumar noted that the valuations for unlisted companies have decreased recently, while listed companies have seen higher valuations.
These contrasting developments are likely to boost both private equity and private debt.
Lakshmi Iyer emphasized that the economy is experiencing a healthy flow of funds, with significant inflows into the private debt market.
The order pipeline looks robust for 2025, and the segment is expected to see substantial growth in the coming years.
Kalpesh Dave highlighted that initial public offerings (IPOs) in India are providing good returns, enhancing the attractiveness of private investments for sophisticated investors.
Key Trends in the Private Equity Market
- Economic Growth and Policy Support GDP growth and the government's constructive policy formation will bolster the credit market in India.- Public Investment and Consumption Government measures for public investment and consumption will boost private investment in 2025.- Rising Awareness The acceptance of private capital is increasing rapidly, and this trend is expected to continue.- Lack of Lucrative Bond Yields The current lack of attractive bond yields will drive demand for private capital.- Stressed Valuations in Listed Space Stressed valuations in the listed market may push investors towards private debt or equity.
Sectors Leading the Growth
- New Generation Businesses Companies like Swiggy, Nykaa, and Zomato are expected to lead the sector growth.- Digital Infrastructure Businesses relying on digital infrastructure will see increased demand for private capital.- Key Sectors Real estate, pharmaceuticals, healthcare, and manufacturing sectors are likely to spearhead growth.
Challenges
- Urban Consumption Patterns Declining urban consumption may pose challenges.- Reducing Disposable Income The global crisis may reduce disposable income, affecting the market.- Geopolitical Uncertainty India needs to remain vigilant about global geopolitical developments.- Market Entry Entering the market at the right price point is crucial.- Product Awareness Players need to be well-informed about the product before entering the market.
Private Debt
Bhavdeep Bhatt from Northern Arc advised financial advisors and MFDs to explore the private debt sector as a promising opportunity.
Sharad Mittal from Arnya Real Estates mentioned that private credit saw significant growth in 2024, particularly in real estate.
The next few years look promising for the private capital sector in India.
Trends in Private Debt
- Real Estate Investment Both residential and commercial real estate have attracted investments exceeding Rs.
75,000 crore in 2024.- Capital Requirements Growing sectors are facing capital needs, making private investment crucial.- Sophisticated Investors Private debt is suitable for sophisticated investors with a high-risk appetite and longer lock-in periods.- Portfolio Weightage Alternatives, including private debt, will see higher weightage in wealthy investors' portfolios.
Opportunities in Private Debt
- Localized Asset Class Private debt is less sensitive to global volatility.- Demand-Supply Dynamics It is a demand-supply driven asset class, making it less volatile.- Government Support The government's focus on start-ups and entrepreneurship is driving the emergence of new businesses requiring capital.
Sectors Spearheading Private Debt Growth
- Renewable Energy Sectors like e-mobility, battery manufacturing, battery charging infrastructure, EV manufacturing, plastic and e-waste management, and solar panel and cell manufacturing will see growth.- Agriculture and Water The drinking, treatment, and irrigation water sector will also generate significant demand for private credit.
Challenges in Private Debt
- Limited Players It is a relatively new asset class with a limited number of players.- Low Awareness Awareness about private debt is still at a critical level.- Geopolitical Tensions Global geopolitical tensions may impact the private debt market in India.
Frequently Asked Questions
What are the key drivers of private market growth in India in 2025?
The key drivers of private market growth in India in 2025 include sustained entrepreneurial activity, robust domestic consumption, and a vibrant startup ecosystem.
Why is private equity and private debt expected to grow in 2025?
Private equity and private debt are expected to grow in 2025 due to contrasting valuations between unlisted and listed companies, healthy economic flow, and good returns from IPOs.
What sectors are likely to lead the private market growth in 2025?
Sectors likely to lead the private market growth in 2025 include new generation businesses like Swiggy and Nykaa, businesses dependent on digital infrastructure, and key sectors like real estate, pharmaceuticals, healthcare, and manufacturing.
What are the main challenges facing the private market in India?
The main challenges include declining urban consumption, reducing disposable income due to the global crisis, geopolitical uncertainties, and the need for players to enter the market at the right price point with adequate product awareness.
Why is private debt considered a promising opportunity?
Private debt is considered a promising opportunity due to its less volatile nature, localized nature, and the government's focus on start-ups and entrepreneurship, which is driving the emergence of new businesses requiring capital.
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