Investments by private equity and venture capital funds surged 60 per cent to a record high of $26 billion in 2017, while the bull markets helped register highest ever exits in a year, a report said on Thursday.
The exits grew 60 per cent to $15.7 billion with the public market being the preferred mode, consultant Bain & Company said.
Terming the year as a "strong year" for the private equity market, its partner Arpan Sheth attributed the rise to improving economic indicators, formalisation of the economy, and steps like the passage of the bankruptcy law to address the non-performing assets issue.
From a fundraising perspective, there was a 48 per cent increase with India-focussed funds raising $5.7 billion, it said, with a bulk $5.1 billion being raised by alternate investment funds like those looking for assets in distress.
The quantum of "dry powder", or the investible money which the funds are sitting on, is constant at $9 billion at the end of the year, it said.
The mergers and acquisition activity increased 53.3 per cent to $77.6 billion, it said adding that the number of active institutional investors has increased to 491.
The report said there were over 200 exits during the year and they were driven more by transaction value. As against a 60 per cent surge in value, the number of deals grew by only 7 per cent, it said.
However, in its report, which comes amid concerns of high valuations in the country, Bain said most funds expect a decline in returns by 2-4 per cent in the next 3-5 years.
"According to India-focused fund managers, a mismatch in valuation expectations between investors and firm owners hinders deal making, while a high level of returns could hinder exits," it said.
The funds are also concerned about limited partners investing directly into companies, it said.