PE exits in India surge 355% in first quarter of 2024, hit 50 deals: report

Private equity (PE) exits in India witnessed a phenomenal surge in Q1 2024, marking a significant shift in the investment landscape. The quarter saw a staggering 354.5 per cent increase in PE exits compared to Q1 2023. This translates to a jump from just 11 exits in the previous year's first quarter to a robust 50 exits in Q1 2024,  according a report by Mazars  in India, a global audit, tax, and advisory services firm.

The total exit value also witnessed a significant increase, reaching US$3.6 billion – a nearly five-fold jump from the previous year's corresponding quarter. Open market exits were a key driver of this growth, with a massive surge in deal value compared to Q1 2023.

PE exits refer to the process by which private equity  firms divest their investments in companies to generate returns for their investors. These exits typically occur after a period of ownership, during which the PE firm works to improve the value of the company through various strategies. A successful PE exit provides a return on investment for the PE firm and its investors.  In the first quarter of 2024 PE firms found  it favorable to exit their investments, potentially due to strong market conditions or successful value creation within the companies they invested in.

Open Market Exits Dominate: The report highlights a significant rise in the value of open market exits during Q1 2024. This means that PE firms were primarily selling their portfolio companies to other companies (strategic buyers) or through Initial Public Offerings (IPOs) where the company goes public on a stock exchange. This is evident from the massive jump in value from US$121.1 million in Q1 2023 to US$2.9 billion in Q1 2024.

Secondary Sales Decline:  Secondary sales, which involve selling PE holdings to another private equity firm, witnessed a sharp decline in Q1 2024 compared to the previous year. This suggests that PE firms might be finding better exit opportunities through open markets or holding onto their investments for longer to potentially extract more value before selling.

The first quarter of 2024 also witnessed a significant resurgence in private equity deals in India, with a total of 310 transactions valued at around $5.2 billion. This marks a sharp contrast to previous quarters and signifies the most active period since Q4 2022 in terms of deal volume. 

Compared to Q1 2023, deal value showcased a remarkable growth of 61.8%, standing at US$3.2 billion in the previous year's corresponding quarter. Transaction numbers rose by 26.5%, from 245 deals in Q1 2023 to 310 deals in Q1 2024, showcasing renewed vigour in India's PE arena. Additionally, Q1 2024 saw a notable surge in PE exit activity, marking the highest number of exits since Q3 2021. 

"A quarter marked by the resurgence of mega deals and sectoral diversification, Q1 2024 showcased a vibrant PE landscape where traditional sectors like infrastructure, telecom, healthcare, and energy gained significant funding. The $2 bn ATC acquisition and notable ESG investments underscored a dynamic investment environment. PE exits surged with 50 deals valued at US$3.6 billion, highlighting robust market conditions. While VC funding saw a decline, the future looks promising with India's resilient fundamentals and policy support fostering a conducive environment for startup growth and global competitiveness," said Akhil Puri, Partner, Financial Advisory, Mazars in India.

Angel/Seed investment trend:

In Q1 2024, Angel/Seed investment remained the biggest category within the PE deal landscape, accounting for 52.6% (down from 56.7% in Q1 2023) of the overall number of deals. After a muted 2023, the Angel/Seed category witnessed a significant upward movement in both value and volume during the first quarter of 2024. The deal value within the category surged by 29% to US$307.3 million during Q1 2024, compared to $238.2 million in Q1 2023. The number of transactions in the quarter expanded by 17.3% to 163 deals, compared to 139 deals in Q1 2023.

Venture capital investment trend:

During Q1 2024, the venture capital category is the second most active category in the private equity deal scape in terms of both number of transactions and deal value, representing a 26.7% share of the overall deal value and a 30.3% share of the total number of transactions. In terms of growth, the category witnessed a significant uptick in volume, recording 94 deals in Q1 2024, marking a 14.6% increase over Q1 2023. In contrast, the overall deal value for the category shrunk by 27.6% and reached US$1.4bn, compared to US$1.9bn in Q1 2023.

Private equity investment trend:

During the quarter, private equity investments category grabbed lion’s share of the overall PE deal value and accounted for a 43.2% share, up nearly 20.0% from 24.0% share in Q1 2023. In terms of growth, the deal value for the category increased nearly two-fold (191.8%) to US$2.3bn in Q1 2024, compared to US$772.0m in Q1 2023. The number of transactions for the category was up by only 1 deal in the quarter, marking 17 deals, compared to 16 deals during the same period in the previous year.