Trade Tensions Chill India PE Deal Closures, Investment Dips
Overview
Global private equity investors are cautious on India, with trade tensions and geopolitical risks slowing deal closures. PE investments fell 16% year-on-year to $35.5 billion in Jan-Nov 2025, below the $50 billion mark. High valuations and a weakening rupee add to investor hesitancy, though underlying appetite for India remains robust.
Global private equity firms are grappling with a slowdown in deal closures in India, a market they are eager to invest in. Persistent trade tensions, notably escalating tariffs and broader geopolitical uncertainties, are forcing investors to adopt a more cautious stance. Data from EY reveals that private equity investments in India reached $35.5 billion between January and November 2025, marking a significant 16% decrease compared to the same period last year.
Trade Storm Dampens Deal Flow
Transactions spanning growth capital, buyouts, and private credit across various sectors have been affected. A key concern is the delayed resolution of the US-India trade deal, which investors believe could fundamentally shift sentiment and valuation benchmarks. Many large PE funds originate from the United States, making bilateral trade relations a critical factor. "If the geopolitical storm settles, there should be a lot more deals," noted Vivek Soni, a partner at EY India. The weakening Indian rupee also adds pressure, eroding the value of existing investments and making new capital deployments less attractive in dollar terms.
Valuation Hurdles and Exit Pathways
Adding to the complexity, high company valuations, partly fueled by a vibrant initial public offering (IPO) market, are presenting another obstacle to deal advancements. While the IPO boom has simplified exits and increased liquidity for PE firms, making India an attractive destination, it has also inflated entry price expectations. However, Soni remains optimistic that despite these challenges, the overall investment appetite for India is strong enough to prevent a drastic decline in total deal value for the year.
Enduring Investor Appetite
Despite the headwinds, major global PE players including Temasek, L Catterton, KKR, and General Atlantic continue to identify and pursue investment opportunities in India. The robust IPO market provides a clear and transparent avenue for profitable exits, which remains a key driver for PE interest. Ajay Tyagi of UTI Asset Management highlighted that this efficient exit process encourages sustained investment into the country. Nevertheless, the immediate future for deal closures hinges significantly on the resolution of international trade disputes and currency stability.
