Moelis India CEO Manisha Girotra on Domestic Funds and Global PE Competition

Look, private credit is not something unique to India. It is a global phenomenon. The reason it has worked globally is fairly simple. Banks are regulated with clear constraints. Private credit funds do not have those constraints in the same way. If a founder wants something closer to equity, that can be structured. If they want subordinated debt or a hybrid instrument, that can be structured. That flexibility on the cap table is what makes private credit attractive. In India specifically, two things have happened. One, corporate balance sheets have cleaned up over the past decade. Two, private capex and M&As [mergers and acquisitions] have returned. Indian companies have become far more acquisitive. So, this capital is not just refinancing. It is being used for M&A, for promoter stake changes, for restructuring shareholding. It is an alternate source of capital that founders now view as long term. Yes, and I think this is more because of a mindset evolution than anything else. When I started my career, selling your company voluntarily was almost unheard of. Businesses were seen as family members. But India became a much larger economy, and that is why scale matters. If you are sub-scale in a consolidating sector, it becomes difficult to compete. Entrepreneurs have realised that monetising at the right time and consolidating can create value. The other big shift is around professional managers. Private equity brought a new culture. For the first time, professionals were given meaningful equity. They had skin in the game. On the very large deals, yes, global funds have an advantage simply because of balance-sheet size. If you are competing for a multi-billion dollar asset, a Blackstone or a KKR will naturally have more firepower. But on the mid-market, domestic funds are competing very effectively. They are doing sizeable transactions and building scale. What is interesting is how they are structuring deals. Often, they bring in their large LPs [limited partnerships] alongside them for bigger transactions. Also, India now has strong professional managerial talent. It is no longer necessary for a promoter to run every business. Professional managers have proven they can scale companies. That gives buyout funds, domestic or global, more confidence. So yes, competition is intense. But I would not say domestic funds are at a disadvantage. They understand the local ecosystem deeply and are building strong franchises. India’s public markets have matured significantly. Twenty years ago, our markets were highly dependent on global flows. If there was a shock somewhere in the world, our markets reacted sharply. Today, we have deep domestic pools of capital through mutual funds, SIP [systematic investment plan] flows and many other ways. For private equity, strong public markets do two things. They provide clear valuation benchmarks. And more importantly, they provide real exit routes. Earlier, you had to rely on a strategic buyer. Now you can list and exit gradually. That gives comfort to global capital when deploying here. Of course, there is competition. Sometimes valuations in public markets are so attractive that companies prefer IPOs [initial public offerings] over private deals. But overall, this has been positive. It has catalysed private-equity activity. India’s opportunity is in implementation and adaptation. We have an engineering base. We have scale. The foundational models may be built elsewhere, but someone has to integrate them into real businesses, whether in pharma, consumer, financial services or manufacturing. IT [information technology] services companies have to pivot. The low-end, volume-driven work will get automated. The future is about moving up the value chain and becoming AI partners to global corporations. The real question is whether we can move from volume to value.