Executive summary
India’s private equity (PE) market entered a disciplined phase in 2025, marked by a sharp slowdown in large-cap dealmaking and a shift toward more selective, value-creation-focused investing. Total private equity and venture capital (PE-VC) investments declined approximately 17%, hitting $36 billion. Traditional PE activity dropped but was partially offset by continued growth in venture capital (VC) and growth capital.
Written in collaboration with
Written in collaboration with
Despite this moderation in value, deal volumes remained resilient, increasing by approximately 10%. This indicates sustained investor interest despite a more cautious deployment approach.
Average deal size declined roughly 25% year over year, reflecting a structural shift in how capital is being deployed. Investors moved away from concentrated, large-cap control transactions and toward smaller check sizes, driven by lower ownership stakes and fewer large buyouts. This shift was underpinned by tighter leverage conditions, persistent valuation gaps, and greater selectivity in underwriting, with capital increasingly spread across a broader set of opportunities.
At the same time, capital gravitated toward resilient, domestically anchored sectors. Traditional sectors and their subsectors continued to account for most of the capital deployed. However, activity became more diversified, and the consumer/retail and manufacturing/industrial sectors gained strong momentum.
These sectors have benefited from consumption recovery, supply chain realignment, and policy support, offering stronger earnings visibility and greater scope for execution-led value creation. In contrast, historically dominant sectors such as IT/ITeS and healthcare saw moderated activity. Financial services began to recover toward the end of the year, supported by a pipeline of larger transactions; multiple deals were announced, pending regulatory approvals expected in the first half of 2026.
This shift in sector focus was accompanied by a broader transition in value creation. With multiple expansions and leverage becoming less reliable, investors are increasingly prioritizing operational improvement, governance, and platform-building strategies to drive returns. Buy-and-build approaches and bolt-on acquisitions are gaining prominence, particularly among mid-sized assets where there is greater headroom for value creation.
Fund-raising remains robust, reinforcing India’s position as a key investment destination within the Asia-Pacific region. Domestic and global capital pools continued to expand, attracting larger fund sizes and increased allocations to India. However, the environment is becoming more competitive, with limited partners (LPs) placing…
Read More: India Private Equity Report 2026
