Why Indian PE funds are betting big on consumer brands and manufacturing

Consumer and manufacturing sectors are attracting strong PE interest as investors seek profitability, earnings visibility and long-term growth opportunities

  India’s private equity landscape is undergoing a visible shift. After years of aggressive bets on technology-led startups and export-driven businesses, investors are increasingly turning towards consumer brands and manufacturing platforms that offer steadier growth, stronger earnings visibility, and clearer profitability paths. 

According to the India Private Equity Report 2026 by Bain & Company and the Indian Venture and Alternate Capital Association, consumer and retail investments surged 2.6 times year-on-year in 2025, while manufacturing and industrial investments rose around 55-60 per cent. At the same time, investment activity in Information Technology and IT-enabled services (IT/ITeS) declined nearly 30 per cent, and healthcare investments fell about 44 per cent. 

 

Experts describe this as a broader shift towards “resilient, domestically anchored sectors” as investors move away from uncertainty linked to tariffs, global demand slowdowns, and prolonged cash burn.

Investors are chasing “quality growth”

Experts say the change reflects a major evolution in how private equity funds evaluate opportunities. 

“The broader shift is from ‘growth at any cost’ to ‘quality growth with earnings visibility’, and scalable cash flows,” said CA Akshay Dawra, Fund Manager (Private Equity) at Chanakya Opportunities Fund-II. 

“Domestic consumption and manufacturing fit that preference far better today than cash-burning growth models. China+1 supply-chain diversification, PLI-led manufacturing expansion and premiumisation trends are strengthening the outlook for these sectors while offering better downside protection,” he added. 

The Bain report also notes that investors are now prioritising operational improvement, governance upgrades, and buy-and-build strategies to generate returns rather than relying on leverage and valuation expansion. 

Kulmani Rana, Founder of venture platform Fibonacci X, said the transition has been building since 2023 and is also tied to investor pressure for real cash returns. 

“The actual factor is something the industry rarely admits: the DPI challenge. LPs are seeking cash returns, not paper gains, and funds from 2019-2021 are expected to return capital,” Rana said. 

DPI, or Distributions to Paid-In capital, measures how much money a PE fund has actually returned to its investors, known as Limited Partners (LPs), compared to the capital invested. As older funds face pressure to deliver exits and real cash returns, investors are increasingly favouring sectors where profitability and exit visibility are stronger. 

“India’s domestic sectors now offer the simplest exits, thanks to an IPO market eager for branded consumer and industrial companies, while the window for export-oriented or growth-tech assets remains closed.”

Consumption story is spreading beyond metros

The consumer opportunity is no longer limited to large urban centres. Siddharth Purohit, Fund Manager- Equity at Invest Value Capital Pvt Ltd, said the rapid rise of quick commerce and e-commerce has fundamentally changed how brands scale across India. 

“The higher acceptance of quick commerce and e-commerce platforms has significantly accelerated the penetration of consumer brands across India,” he said. 

“Post-pandemic, there has been a dramatic shift in consumer behaviour, wherein customers are increasingly willing to experiment with newer brands, unlike earlier when established names used to command a natural premium.” 

Importantly, he noted that the trend is spreading strongly across Tier II and Tier III cities as well. 

"Categories such as beauty care, wellness, luggage, footwear, premium food, and lifestyle products are seeing new-age brands emerge rapidly and challenge legacy players," Purohit added. 

The Bain report similarly highlighted premiumisation, higher purchase frequency, and new discretionary spending categories as key drivers behind rising investor interest in consumer businesses. 

Food and beverage brands, quick-service restaurants, cafes, electronics, and fashion were among the biggest magnets for PE capital in 2025. Rana pointed to the massive private equity deal involving Haldiram Snacks Food Pvt. Ltd. that concluded in early 2025, as a strong signal for the market. 

“Within consumer, packaged foods and ethnic snacks lead clearly. The Haldiram’s round signalled how much patient capital wants iconic regional brands with national runway,” he said. 

He added that direct-to-customer brands and quick-commerce-driven categories are also drawing strong investor interest as funds gain confidence that these channels can scale profitably.

Why manufacturing is attracting fresh PE interest

Meanwhile, the manufacturing boom is being powered by a mix of geopolitics, supply-chain diversification, and policy support. 

“India was historically not considered a serious global alternative,” Purohit said. “However, changing geopolitical equations and supply chain realignments have altered this perception meaningfully. Most large global OEMs now intend to diversify their sourcing base across multiple geographies, and the China+1 strategy is no longer merely a slogan — it is increasingly becoming a reality within global manufacturing.” 

The Bain report says investors are increasingly favouring manufacturing because of:

• Global supply-chain realignment
• Production-linked incentive (PLI) schemes
• Rising infrastructure spending
• Localisation push
• Increasing value-added manufacturing

The report also points out that sectors such as electric mobility, electronics manufacturing, semiconductors, aerospace, and industrial platforms are attracting strong investor attention. 

Dawra shared that electronics exports crossed $48 billion in FY26, reflecting the scale-up opportunity investors are now chasing. 

“Within manufacturing, electronics, semiconductor manufacturing, EV supply chains, precision engineering and industrial manufacturing platforms are seeing strong capital allocation,” he said. 

Rana added that investors are increasingly favouring sectors that combine domestic demand with export potential. 

“The common thread across all of these is exportability with domestic demand as a floor. That combination, growth at home with optional global upside, is what every PE committee wants on a slide right now,” he said.

Tech fatigue and profitability concerns

Another major factor behind the shift is growing investor caution around traditional technology bets. Global uncertainty, tighter liquidity, and concerns around profitability have made investors more selective. 

“Tariffs, geopolitical tensions, supply-chain disruptions and higher interest rates have reduced investors’ appetite for long-gestation, cash-burning businesses,” Dawra said. 

Purohit added that while several Indian startups have built strong visibility and revenue growth, persistent cash burn remains a concern for many investors. 

“This is likely one of the primary reasons for relatively muted capital flows into the sector,” he said, although he added that select deep-tech and niche technology firms continue to attract investor interest. 

Industry sources also pointed to broader uncertainty around the global AI cycle and the lack of clarity over long-term monetisation models, which has led many funds to prioritise profitability and cash-flow visibility over hypergrowth narratives. 

However, Rana cautioned against reading too much into the decline in IT/ITeS investments alone. “The 30 per cent decline in IT/ITeS also warrants context, as the sector experienced a 300 per cent surge the previous year due to one-time mega-deals,” he said.

Why this PE shift may not be temporary

Experts believe the move towards consumer and manufacturing is more structural than temporary. 

“This appears more structural than cyclical,” Dawra said. “Investors are shifting towards India’s long-term domestic growth story driven by rising consumption, premiumisation, and manufacturing scale-up.” 

Rana echoed a similar view but noted that some of the enthusiasm is also tactical. 

“The structural story is real. India is set to overtake Japan as the third-largest consumer market this year and PLI is finally producing exportable scale in mobile phones and electronics,” he said. 

The Bain report also notes that India continues to remain a high-priority market for global funds because of resilient domestic demand, policy support, and improving infrastructure. 

For PE investors, the attraction is becoming increasingly clear. In an uncertain global environment, sectors tied to India’s domestic growth story are offering something that many global tech bets currently cannot: visibility, resilience, and scalable profitability.