India-focused private equity (PE) and venture capital (VC) firms raised $6.8 billion from limited partners in 2024, marking an 18% drop from the previous year.
According to data compiled by Venture Intelligence, as many as 52 funds marked their first, second, or final closes between Jan. 1 and Dec. 14, 2024, compared with 72 in the entire 2023.
The drop is natural, say experts, as too much capital had gone into the PE-VC ecosystem in the previous years, even as dealmaking failed to keep pace due to macroeconomic headwinds.
In 2022, for instance, PE-VC firms investing in India had raised a whopping $11 billion from LPs through 73 fund closes.
Typically, a fund’s first, second, or final close involves garnering commitments from LPs, with a small portion, say 10%, drawn upfront, and the rest of the capital flowing in when deals are sealed.
“We are observing a more cautious deployment of capital by funds across all stages,” Deepak Padaki, President at Catamaran India, the family office of former Infosys chairman NR Narayana Murthy, had told DealStreetAsia in an interview.
However, he was also quick to add that it is not all gloom and doom as several Indian PE and VC funds lured global LPs, which resulted in some funds raising record capital in 2024.
Among top PE-VC firms that raised significant capital in 2024, Kedaara Capital topped the charts amassing $1.7 billion in the final close of its fourth fund, underscoring its confidence in the long-term growth potential of the Indian economy.
This is the firm’s biggest investment vehicle ever — its third fund closed at $1.1 billion in the middle of COVID-19 in 2021. It raised $750 million for its second fund in mid-2017, while its debut fund was closed in 2013 at $540 million.
In other significant fundraisings in 2024, Edelweiss Alternative Asset Advisors amassed $963 million, while ChrysCapital garnered $700 million. Separately, 360 ONE raised $500 million, while Alpha Alternatives accumulated $450 million in its first close.
Going forward, fund managers hitting the road may face an uphill climb as too many firms are approaching LPs to raise capital.
The worst hit from this trend could be first-time funds as LPs are already showing a preference towards robust leadership, well-defined strategies, and a good exit track record. This probably explains the 43% drop in capital raised by debut funds in India in 2024.
According to the Venture Intelligence data, debut PE-VC funds raised a meagre $595 million in 2024 as of December 15, versus over $1 billion in 2023.
However, all’s not lost. “Those who bring valuable industry expertise from their prior roles stand a better chance,” Siddharth Jhunjhunwala, Managing Director-Head, Waterfield Fund of Funds, had earlier told DealStreetAsia.
Those who raised maiden investment vehicles in 2024 include names such as Playbook Partners, Filter Capital, Pavestone Capital, Avaana Capital, and Client Associates.
