India Private Equity Report 2026: Market Enters Disciplined Phase Amid Selective Dealmaking

India’s private equity and venture capital market transitioned into a more disciplined phase in 2025, with total investment value declining 17% to $36 billion. Despite the drop in overall value, deal volumes increased by approximately 10%, signaling a structural shift toward smaller check sizes and more selective underwriting. This evolution reflects a move away from large-cap control transactions toward value-creation-focused investing in resilient, domestically anchored sectors like manufacturing and consumer retail.

In 2025, the Indian PE-VC landscape saw a notable divergence between deal volume and value, as the average deal size plummeted by roughly 25%. While total investment hit $36 billion, the 10% rise in deal volume indicates that investors are spreading capital across a broader set of opportunities rather than concentrated large-cap buyouts. This trend was driven by tighter leverage conditions, persistent valuation gaps, and a strategic pivot toward mid-sized assets where investors see greater headroom for operational value creation. Traditional private equity activity slowed, but the market was bolstered by steady growth in venture capital and growth capital segments.

Sectoral preferences shifted toward domestically anchored industries, with manufacturing, industrials, and consumer retail gaining significant momentum due to supply chain realignments and policy support. Conversely, historically dominant sectors like IT/ITeS and healthcare experienced moderated activity, while financial services showed signs of recovery toward the end of the year with several large deals pending regulatory approval for 2026. To drive returns in this environment, firms are increasingly prioritizing buy-and-build strategies and bolt-on acquisitions. Operational improvements, governance enhancements, and platform-building have largely replaced multiple expansion and leverage as the primary engines of value.

Exit activity remained stable at approximately $34 billion, a modest 3% increase, though investors are diversifying away from public markets toward strategic sales and buybacks to manage aging portfolios and extended holding periods. Artificial intelligence has emerged as a critical factor in both diligence and portfolio management, with investors evaluating assets for disruption risks while leveraging AI to improve margins through automation and pricing optimization. Looking toward 2026, the outlook remains cautiously optimistic, supported by stable inflation and moderating interest rates. However, the market faces potential headwinds from global liquidity constraints and geopolitical uncertainties, requiring a continued focus on execution-led growth and disciplined capital deployment.