Corporate Financing Analysis - Indian PE Industry Growth To Overcome Growing Pains - 04 DEC 2017


The growth story of the private equity (PE) asset class in India over recent years has been characterised by rapidly expanding assets under management (AuM) fueled by strong economic growth and attempts by New Delhi to attractive investment into the country through regulatory changes and new policy implementation. Despite the recent slowdown - and even a contraction in 2016 - of those industry AuM, we point to: the y-t-d period lining up to become a record 12-month period for successful new funds closes, and an increase in the volume of funds in the market at present. These are two key reasons why we expect the PE industry in India to return to its growth trajectory once more in 2018.

We highlight that this positive view of the trajectory of growth for the PE asset class in India feeds into our broader view that the maturing and expansion of the Asian PE industry remains ongoing, with India (alongside China) as something of a rising star within it. While not without complication, we point to the high volume of fund closes and funds currently in the market on a historical basis as supportive of this view. Taking this into account, we are of the opinion that the recent slump in industry assets in India represents more of a bump in the road, rather than a shift away from the PE industry's much talked about long-term growth trend in the country and the Asian continent more broadly, with the downturn in numbers stemming from an increase in distributions made to investors as previous investments reach the end of their typical PE investment cycle. Furthermore, the fact that the industry has only seen a slight dip in interest, rather than a wholesale turnaround in sentiment suggests to us that the PE industry is in a strong position to continue growing over the medium to long term ( see ' Asian PE Market Growth Stutter Only Temporary ' , April 26 2017).

Expanding Assets Once More

PE A Favourite
India-Based Alternative Assets Under Management (AUM) By Asset Class, USDbn
Source: Preqin (data correct to December 2016), BMI

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