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The Top 3 Trends Private Equity Should Be Watching in H2 2023

Photo of Private Equity in India

By AltG Research On Behalf Of Poornima Vardhan And Taponeel Mukherjee

The last 6 months have been rather busy for private equity in India - Big deals with even bigger valuations. While big-ticket cheques and investment growth in India are positive signs, this is not without its downside. High valuations mean low returns for most of these funds, as we will see this scenario play out in the near future.

So where are the high returns opportunities in India that investors need to be watching?

  1. Special Situation Investing: With VC winter, startups face the biggest challenge: high valuations, high cash burn and no cash flows in the future. Byju's and PharmEasy show that The Great Indian Startup sale is here. This is a gold mine where investors can get in cheaply and generate massive returns. However, this opportunity can only be used by those who can understand the real value of the underlying assets in these startups.

  2. Capital Allocation: While Sexsex has seen the highest highs last month, this growth is limited to the top 30 Indian companies. For the stock market to 2X its market cap, it is essential for micro, small and mid-cap companies to allocate capital to high-growth businesses (own or acquire).

  3. Creating Platforms to drive scale: While the focus for private investment in India so far has been large-cap companies (by private equity) or startups (Venture capital), the biggest and the neglected asset class is the micro, small and mid-cap companies with over 75 million such companies. Investors need to consider investing in high-growth MSMEs that are at relatively low prices to generate market-beating returns.


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