In India, secondary investors are increasingly acquiring stakes in assets held by private equity funds, aiming to tap into a deal pipeline valued at approximately US$ 20 billion. This trend has gained significant momentum in recent months, as highlighted by Mr. Paul Robine, the founder and CEO of TR Capital, an Asia-focused secondary buyer. This surge in demand for secondary transactions comes as private equity managers seek to divest nearly US$ 92 billion in unrealized deal value from companies they backed over the past six years.

While the exit environment for these funds has improved considerably, Mr. Robine noted that selling these companies remains a time-consuming process, particularly for venture capital funds investing in innovative and rapidly growing firms within India.

In a secondary deal, investors purchase existing assets or commitments from primary investors or the private equity fund. A notable segment of this market involves continuation funds, where assets are transferred to a separate vehicle, allowing the fund or general partner to retain them longer. Secondary funds are actively seeking deals ranging from firms expected to go public within the next 18 to 24 months to the sale of asset portfolios by venture capital funds and the establishment of continuation funds by private equity managers. According to secondary buyers and advisors, these transactions could potentially generate up to US$ 20 billion annually.

The success of ChrysCapital Management Co.'s continuation fund, which raised US$ 700 million earlier this year to maintain its stake in the National Stock Exchange of India Ltd., has sparked considerable interest among other private equity firms. Ms. Sunaina Sinha, the global head of the private capital advisory group at Raymond James Financial Inc., predicts that at least three to four continuation funds will be launched in India within the next 12 months.

Additionally, venture capital funds facing a sluggish deal-making environment for growth assets are pursuing exits to return funds to investors ahead of upcoming fundraising efforts. Mr. Sameer Nath, the chief investment officer at 360 One WAM Ltd., one of India's largest wealth managers, noted this strategy as essential for sustaining investor confidence.

Unlike the US and Europe, where secondary deals predominantly involve buyouts, transactions in India are more focused on assets where managers hold minority stakes. Brooke Zhou, a partner at LGT Capital Partners, emphasized this distinction, as LGT Capital allocates 20% to 25% of its global fund to Asia and is increasingly eyeing opportunities in India as the pipeline expands.

Most secondary deals in India are priced at discounts of 20% to 25% of their net asset values, making them attractive to secondary buyers. Mr. Amit Gupta, a founding partner at TPG NewQuest, expressed optimism, stating that the firm expects to deploy up to 50% of its latest secondary fund in India.

As more global managers explore deals in India, some are entering the market for the first time. Mr. Kunal Sood, managing director at Pantheon’s Asia investment team, remarked that this trend reflects the maturation of Indian markets. General partners are now less concerned about bringing in secondary investors, indicating a more stable and receptive environment for investment.

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