Indian policy reforms, economic growth creating fertile ground for PE investments: KPMG

KPMG, one of the Big 4 accounting firms, on Monday released a report which said that India’s demographic dividends, pro-business policy reforms, and high-growth markets are creating a fertile ground for investments as private equity (PE) investors look for China alternatives.

The report, titled Asia Pacific Private Equity Barometer 2024 - PE Investment Trends and Opportunities, highlights a significant shift in investment trends in Asia, particularly in the first half of 2024.

India has emerged as a key beneficiary of this shift, with private equity (PE) investments rising by 20% in H1 2024 compared to the same period in 2023. This marks a reversal from the downward trend in total investments that began in the second half of 2021.

In contrast, the report noted that China’s allure might be fading as investors continue to remain wary of market uncertainties. As a result, optimism about India’s economic potential has soared, with PE investors now seeing the country as a more stable and promising destination for investment.

“India’s private equity scene has graduated from the minor leagues to the big leagues. What used to be considered a frontier market is now becoming a sophisticated landscape, where bigger, smarter deals are being found every day. The opportunities here aren’t just growing–they’re multiplying,” said Nitish Poddar, Partner, Head of Private Equity, KPMG in India.

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PE investments in the Asia Pacific (ASPAC) regions have begin to stabilise, indicating the landscape to be returning to pre-pandemic norms. While the first half of 2024 saw an uptick in deal volumes, there has been a notable decline in deal values, which have dropped to some of the lowest levels seen since before the pandemic. This suggests that while deal activity is picking up, investors remain cautious.

The report cites higher borrowing costs amid rising interest rates have significantly impacted the ability of these firms to pursue larger deals, leading to conservative valuations and deal structures.

Despite this, there has been a sharp reversal in fundraising trends after years of tepid activity, the company noted in the report. Fundraising has surged to its highest level in five years in ASPAC regions, suggesting that global and regional firms are positioning themselves to do more deals in time.