Equity alternative investment funds in India clock robust pooled IRR, outperform Sensex

New Delhi: Equity alternative investment funds (AIFs) in India achieved a notable pooled internal rate of return (IRR) of 21.5 per cent between fiscals 2013 and 2024, according to a report on Tuesday.

Across the past five fiscals, the benchmark outpaced the BSE Sensex Total Return Index (TRI), reaffirming the resilience and importance of private markets in India’s investment landscape, according to the second edition of the Crisil-Oister report.

Stage-wise, the benchmark of early-stage funds generated a pooled IRR of 26.9 per cent between fiscals 2013 and 2024, outperforming the BSE 250 Smallcap TRI by 4.29 per cent.

Similarly, the benchmark of growth and late-stage funds delivered a robust pooled IRR of 23.6 per cent between fiscals 2015 and 2024, surpassing the BSE 200 TRI by 5.97 per cent, the report noted.

“This year’s report reinforces our long-held belief that private capital is not only participating in India’s growth story but also shaping it,” said 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, he added.

The distribution to paid-in (DPI) capital ratio shows the realised gains for an investor. The benchmark belonging to the earliest vintage — fiscal 2014 — had a DPI ratio of 1.56, meaning investors received 56 per cent more than their initial investment (as of March 2024).

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.

AIFs drove the private market deals, with total commitments across categories I, II and III totalling Rs 11.35 lakh crore as on March 31, 2024, marking 87-fold growth compared with March 31, 2014.

Jiju Vidyadharan, Senior Director, Crisil, said that private markets have played a pivotal role in fostering innovation, with AIFs contributing significantly by channelling private capital to new-age companies and startups.

–IANS