PE/VC Investments Poised for Growth in 2025 Despite Uncertainties: Report The outlook further stated that the early days of 2025 have shown promising momentum, with PE/VC investments in India surging by 37 per cent month-on-month in January. This marks a slight dip compared to the same period in 2024, but the sequential uptick from December 2024, "notwithstanding the spike in uncertainty on geopolitics" and aggressive changes by the US trade policies, is said to be encouraging.

The private equity (PE) and venture capital (VC) landscape in India will continue to be optimistic despite the challenges and uncertainties facing the global economy, said Vivek Soni, Private Equity Leader, EY India.

"The year ahead could be an exciting one for investors as heightened risk and uncertainty coupled with deep correction in the listed mid-cap and small-cap segment create an environment that is favorable to buyers/ investors," said Soni in his report on India's PE/VC outlook for 2025.

The outlook further stated that the early days of 2025 have shown promising momentum, with PE/VC investments in India surging by 37 per cent month-on-month in January. This marks a slight dip compared to the same period in 2024, but the sequential uptick from December 2024, "notwithstanding the spike in uncertainty on geopolitics" and aggressive changes by the US trade policies, is said to be encouraging.

The report said that the expected decline in interest rates in 2025 will also be an important factor that will influence PE/VC investments in India. "This trend could provide a boost to investments, particularly in yield-generating sectors like infrastructure and real estate, as investors move fast to buy assets to take advantage of yield compression. Lower borrowing costs will also improve bottom lines of companies that are levered/ looking to take on debt to fund growth capex."

However, the PE/VC markets in India in 2024 faced a number of challenges, from political events such as general elections to persistent geopolitical tensions, slowing growth, and the impacts of a depreciating Indian rupee.

"Notwithstanding these challenges, PE/VC investments in India held strong, totaling US$56 billion–the second highest on record. These numbers underline India's strong macroeconomic environment and political and policy stability conducive to investment," wrote Soni.

The outlook also noted that sectors such as e-commerce, technology, financial services, media and entertainment, and food and agriculture experienced significant growth, while life sciences, industrial products, and retail consumer products recorded reduced investor interest. Interestingly, infrastructure, real estate, and financial services led the bunch, with infrastructure leading and real estate experiencing a decline from last year.

Last year also saw exit values reaching a total of USD 26.7 billion, marking a 7 per cent increase from 2023, despite a 7 per cent decline in the number of deals.

"While some investors took advantage of buoyant capital markets to secure returns through IPOs and open market exits, it remained a challenging year on account of slowing growth and increase in uncertainty," said Soni.

The uptick in investment activity from December 2024 signals a positive trend said the report. A favorable macroeconomic environment, stable government policies, and a correction in the public markets are expected to improve the deal volumes and value, as seller expectations are reportedly being more aligned with investor valuations.

"The recent and continued correction of listed mid-cap and small-cap indices could provide a more balanced investment climate, presenting significant opportunities for both domestic and international investors in India's PE/VC ecosystem. India's PE/VC ecosystem is navigating a period of significant change, but optimism for 2025 is undeniable," said Soni.