Investments by private equity and venture capital funds surged 60 percent to a record high of USD 26 billion in 2017, while the bull markets helped register highest ever exits in a year, a report said today.
The exits grew 60 percent to USD 15.7 billion with the public market being the preferred mode, consultant Bain & Company said.
Terming the year as a "strong year" for the private equity market, its partner Arpan Sheth attributed the rise to improving economic indicators, formalisation of the economy, and steps like passage of the bankruptcy law to address the non performing assets issue.
From a fund raising perspective, there was a 48 percent increase with India-focussed funds raising USD 5.7 billion, it said, with a bulk USD 5.1 billion being raised by alternate investment funds like those looking for assets in distress.
The quantum of "dry powder", or the investible money which the funds are sitting on, is constant at USD 9 billion at the end of the year, it said.
The mergers and acquisition activity increased 53.3 percent to USD 77.6 billion, it said adding that the number of active institutional investors has increased to 491.
The report said there were over 200 exits during the year and they were driven more by transaction value. As against a 60 percent surge in value, the number of deals grew by only 7 percent, it said.
However, in its report, which comes amid concerns of high valuations in the country, Bain said most funds expect a decline in returns by 2-4 percent in the next 3-5 years.
"According to India-focused fund managers, a mismatch in valuation expectations between investors and firm owners hinders deal making, while a high level of returns could hinder exits," it said.
The funds are also concerned about limited partners investing directly into companies, it said.