India’s PE liquidity crunch deepens as aging assets pile up

The report says aging assets and delayed distributions are already reshaping investor behaviour, with funds increasingly relying on partial exits, buybacks and strategic sales instead of traditional public market exits.

Indeed, the share of partial exits for 2020-2021 vintage assets were 23%, compared to 8% for 2015-16 vintage at a similar stage.

Public markets, historically the preferred exit route for PE firms in India, turned volatile in 2025. Exit value through public markets fell 28% year-on-year to around $14 billion, dragged by a 35% drop in block and bulk trades, even as IPO exits stayed flat at roughly $4 billion.

That has created a bottleneck for firms trying to return capital to limited partners (LPs), who are becoming increasingly demanding about distributions and track records.

“Aging assets, extended holding periods, and delayed distributions led to subdued capital recycling,” the report noted, adding that general partners are now prioritizing smaller, lower-risk deployments over concentrated megadeals.

Meanwhile, share of exits via buybacks rose from 2% in 2024 to 21% in 2025 and that of strategic sales increased from 16% to 21%. Buybacks were anchored by a marquee deal of Schneider Electric India’s (about $6.4 billion) acquisition by its global parent from Temasek Holdings.

Overall PE activity in India fell sharply in 2025, with traditional PE investments declining 33% year-on-year to $19.6 billion, while average deal sizes dropped to $118 million from $209 million in 2024.

Instead of chasing billion-dollar control deals, funds are increasingly pivoting toward mid-sized assets. Deals below $100 million surged from 68 in 2024 to 117 in 2025, while large-ticket transactions nearly halved.

His shift is caused by multiple factors, including persistent valuation gaps between buyers and sellers, tighter leverage conditions, geopolitical uncertainty, and competition for capital globally. Promoters, the report noted, remain anchored to the lofty multiples seen three to four years ago, while investors are underwriting more conservative growth assumptions. This led to wide bid-ask spreads, prolonged negotiations, and delayed or shelved processes.

As a result, investors are focusing more heavily on governance upgrades, bolt-on acquisitions and operational improvements to generate returns. Sectors tied to domestic consumption and manufacturing are drawing the most attention.

Even so, exits remain the industry’s central pressure point. While overall PE-VC exit values stayed broadly stable at about $34 billion in 2025, exit volumes dropped from 360 to 290, indicating fewer successful liquidity events.