New Delhi [India], January 14 : Alternative Investment Funds (AIFs) focused on unlisted securities have delivered impressive returns, achieving a pooled internal rate of return (IRR) of 21.5 per cent between fiscal years 2013 and 2024, according to the Crisil-Oister report, 'No ifs about AIFs 2.0'.
In the past five years, these funds outpaced the BSE Sensex Total Return Index (TRI), highlighting the strength of private markets in India, the report added.
By definition, The internal rate of return (IRR) is the annual rate of growth that an investment is expected to generate.
Early-stage AIFs performed exceptionally well, generating a pooled IRR of 26.9 per cent during the same period4.29 per cent higher than the BSE 250 Smallcap TRI. Growth and late-stage funds also shone, delivering a pooled IRR of 23.6 per cent, outperforming the BSE 200 TRI by 5.97 per cent.
Notably, the earliest funds from fiscal 2014 had a distribution-to-paid-in (DPI) capital ratio of 1.56, meaning investors received 56 per cent more than their initial investment as of March 2024. This underlines the strong potential of private equity investments in India.
Commenting on the trend, Sandeep Sinha, Co-CEO, Oister, "In fiscal 2024, private markets once again demonstrated their ability to outperform and lead through long-term growth and sectoral innovation, setting a benchmark for resilience, scale and innovation."
According to the report, late-stage and big-ticket deals form a significant share of private market equity deals, reflecting the increasing maturity of India's private market ecosystem.
In fiscal 2024, late-stage transactions accounted for 39 per cent of the total equity deal value, compared with 18 per cent in fiscal 2014, reflecting a market focused on scalability and predictability.
In comparison, big-ticket deals, or those exceeding Rs 500 million each, captured 90 per cent of the total value despite constituting only 28 per cent of the total transaction volume, underscoring their potential to deliver robust returns, as per the report.
AIFs drove the private market deals, with total commitments across categories I, II and III totalling Rs 11.35 trillion
as of March 31, 2024, marking ~87-fold growth compared with March 31, 2014.
Notably, Category II AIFs raised Rs 9.13 trillion as on March 31, 2024, channelling private capital into high-impact ventures and sectors.
In fiscal 2024, private markets demonstrated increasing liquidity and inclusivity. A record 210 initial public offerings, surpassing the combined total of the previous two fiscals, provided exit opportunities for investors.
Showcasing innovation beyond metros, non-Tier I cities accounted for 8 per cent of deal volume in fiscal 2024 and clocked a compound annual growth rate of 24 per cent in value terms between fiscal 2014 and 2024.
Financial services and financial technology sectors captured 17 per cent of deal value, driven by India's digital financial
leadership. Meanwhile, the share of climate and related technology grew to 7 per cent in 2024 from 1 per cent in 2014, reflecting
increasing global emphasis on sustainability, the report added.
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