PE/VC investments at $13.7B in Q1 2025, down 14% YoY; pure-play deals surge 62%: Report

The deal activity was subdued as well, with 284 transactions recorded, down 20% year-on-year and 11% lower than the 319 deals seen in Q4 2024.

Apr 21, 2025 - 14:12

PE/VC investments at $13.7B in Q1 2025, down 14% YoY; pure-play deals surge 62%: Report

Private equity and venture capital (PE/VC) investments in India totalled $13.7 billion in the first quarter of 2025, registering a modest 2% decline from the previous quarter and a steeper 14% drop compared to the same period last year, according to the IVCA-EY monthly PE/VC roundup.

The deal activity was subdued as well, with 284 transactions recorded—down 20% year-on-year and 11% lower than the 319 deals seen in Q4 2024.

Despite the overall contraction, the report revealed that the share of pure-play PE/VC investments rose significantly, reaching $10.9 billion, a 62% increase from Q1 2024 and a 19% rise from the previous quarter. These accounted for 79% of total investments, compared to 42% in Q1 2024.

"While a few large deals helped sustain the PE/VC investment value in 1Q2025, overall investor sentiment remains cautious on account of several macroeconomic and geopolitical factors, including policies being implemented by the current US administration, decisions on tariff, interest rate changes by central banks, and declining capital market valuations," said Vivek Soni, Partner and National Leader, Private Equity Services, EY.

"As private market valuations have yet to correct meaningfully, PE/VC investors are in no rush to close deals and are rightfully monitoring evolving conditions to ensure that macro and micro risks are adequately priced in. The upcoming cycle of quarterly corporate earning announcements will set the tone for the short-term outlook for India Inc. performance," he added.

The investments in infrastructure and real estate saw a sharp pullback, falling 69% year-on-year to $2.8 billion, compared to $4.9 billion in Q4 2024. Deal volume in this segment also dropped 67%, as per report.

The technology sector attracted the highest funding at $3.1 billion across 41 deals, a 265% increase over Q1 2024. Financial services saw $1.6 billion across 43 deals, while food and agriculture grew to $1.2 billion, up 142% year-on-year.

The healthcare sector continued to receive steady investor interest. Since 2020, the sector has seen $14.5 billion in PE/VC funding, with hospitals and clinics accounting for 60% of this capital. Over 55% of the deals were in this segment.

Digital health startups have also gained visibility, securing $1.9 billion across 143 deals since 2020, it highlighted.

Buyouts increase, early-stage activity picks up

Buyouts accounted for $5.2 billion across 20 deals, a 22% increase both year-on-year and quarter-on-quarter. Growth capital deals stood at $3.1 billion across 53 deals, showing a slight decline from the previous year.

Startup investments rose to $2.7 billion across 167 deals, up from $1.6 billion in Q1 2024. This suggests continued activity in early-stage funding despite overall market caution.

The exit activity in Q1 2025 totalled $8 billion across 39 deals, a 57% increase from Q1 2024 but marginally below the $8.3 billion recorded in Q4 2024, the report noted. Strategic exits contributed $4.1 billion, a notable increase from $460 million a year ago.

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PE-backed IPOs generated $1.4 billion from four listings, while secondary sales and open market exits showed mixed trends.

The infrastructure sector led exits by value at $3.8 billion across just four deals and technology also featured prominently in exit activity.

Although Q1 included high-value transactions such as New Mountain Capital’s $1.5 billion acquisition of Access Healthcare and Temasek’s $936 million investment in Haldiram Snacks, deal closures were impacted by concerns around valuations, market volatility, and macroeconomic uncertainty.

"The volatility in the mid-cap and small-cap space has ensured the closure of the IPO window for most players, which is a dampener for PE/VC exits. This along with reluctance of PE investors to engage at current valuations can be a tailwind for the Private Credit asset class - we project a positive outlook for Private Credit in calendar year 2025," Soni noted.