Deal Street Slows Down And India's IPO Frenzy Is A Key Factor Behind It

The initial-public-offering bull run that lasted for over two years has inched out other forms of exits as private-equity/venture-capital players unlock value.

In 2024, the number of strategic sales of PE/VC firms to companies or other PE funds slipped to its lowest in three years — falling from $4.7 billion to $3.3 billion in 2023, registering a 29% drop, as per India Investments Pulse report by Praxis Global Alliance shared with NDTVProfit.com.

Strategic-exit-deal volume, too, fell 40% from 60 deals to 36, with a 40% year-year-year fall. Ease and valuation richness of public listings led to slowdown in strategic exits, the Praxis report adds.

"Factors contributing to this tepid growth in strategic exit volumes include high interest rates, mismatch in buyer and seller expectations and competition from the capital markets,” adds a report PE/VC Trendbook by E&Y.

A few large deals, however, remained outliers in this segment with Mankind Pharma's acquisition of Bharat Serums for $1.6 billion, which allowed the exit of Advent International. Malaysia's clean energy arm, Gentary, acquired a portion of Brookfield's green energy asset for $900 million, allowing the eponymous investor to unlock value.

Other over $100-million deals of the year include General Atlantic and Invus Group's exit via Tata Consumer Products' investment in Capital Foods; and the exit of Peak XV Partners, Tanglin Venture Partners and others as Sentinel One invested in Ping Safe.

Public Markets Entice Investors

PE/VC players have been making a killing in the public markets — with IPO-backed exits hitting an all time-high in 2024. Public market exits accounted for $17 billion in 153 deals from $14 billion in 142 in 2023 — 21% and 7% increase respectively. The importance of public market exits have been going up in the last few years, with a multifold growth of over fivefold growth in the last four years.

Some of the PE/VCs that exited via public markets include Partners Group, Kedaara Capital in Vishal Mega Mart; Blackstone from Mphasis, Everstone from Omega Healthcare. A clutch of PE/VCs unlocked value from Swiggy's IPO like Elevation Capital, Goldman Sachs, Norwest and Accel India.

While the IPO markets have been adding to the coffers of private investors, the party might not last too long. Come 2025, the long-lasting bull markets in the secondary markets have seen bears hammering down the markets due to the looming tariff war and geopolitical uncertainties. It could have a cascading impact on the IPOs and, hence, narrow the window for public market exits for private investors.

"IPO frenzy is expected to continue but it will be measured. Retail and institutional investors have an appetite to invest in good businesses of scale but businesses, which are not robust and stable, will find it challenging to raise money from public markets," says Akshat Gupta, practice member of private capital at Praxis Global Alliance.

As the rush ends, valuation expectations might also simmer down, allowing more deals to go through via strategic route. "The recent correction in asset prices is expected to narrow the bid-ask spread, potentially boosting the M&A deal activity in the near future," opines the E&Y report.

This year, the tide can also turn for strategic sales in 2025 as a slowdown looms across sectors and categories. The year has also kicked off with a large deal — popular D2C brand Minimalist was acquired by Hindustan Unilever Ltd. for Rs 2,955 crore for a 90.5% stake.

A lot of early investors are also seeing high-value returns in strategic sales. In early 2025, angel investors Inflection Point Ventures exited enterprise data management company Parablu with over 30% Internal rate of returns for investors — as it was acquired by CrashPlan, a global leader in cyber-ready data resilience.

"Strategic deals will increase as Indian corporates and MNCs are getting more active in search for potential targets. There are consolidations and scale acquisitions expected with some of the companies being backed by PE VC investors. We expect more such large deals to happen in the coming years," says Gupta.

Funding Winter Thaws Down 

The PE-VC investments in 2024 stood at $56 billion, seeing a 5% uptick over the year before. “This recovery was mainly due to increased buyout and credit investments, as well as an increase in startup investments," says E&Y.

Credit investments hit an all-time high of $10.8 billion, marking a 52% YoY increase. Startup investments followed closely, as it hit $10 billion, marking a 13% YoY increase.

Deal volumes, however, hit a record high as the markets veered towards a large number of smaller deals. There was a notable decline in large deals (above $100 million) in terms of value ($37.8 billion in 2024 vs $41.7 billion in 2023) even as the number of deals remained consistent. Mega deals and in the higher segments were notably fewer and were lower in value, causing the slump. 

Investments kicked off in 2024 with good elan with expectations of governments cutting interest rates, but as the year progressed, investors turned wary. Hence, the trends mirrored that of what happened in the last two years — a buoyant first half and a dimmer second half. 

"The first half attracted PE/VC investments of $32.4 billion, while the second half saw investments of $23.6 billion, as the investors exercised increased caution amid rising geopolitical conflicts, the US elections and elevated valuation levels on account of the public market buoyancy," adds E&Y report.

Katya Naidu is a senior business journalist who writes about equity markets, startups, energy, infrastructure, real estate and healthcare.