This publication has been published by Chambers and Partners at Equity Finance 2025 | Global Practice Guides | Chambers and Partners

Introduction

In today’s fast-evolving financial ecosystem, equity finance has emerged as a dynamic force driving innovation, expansion, transformation and disruption across industries. Unlike plain vanilla debt financing, which can impose a huge financial burden on borrowers, equity finance (including structured equity finance) enables companies to raise large amounts of capital from patient institutional investors, in a manner that is synergistic with the ecosystem of such capital providers. Therefore, this method of fundraising is favoured by businesses seeking flexibility on repayment terms, long-term backing (including the right to seek additional funding across multiple milestones) and strategic support with respect to business opportunities and operational efficiencies.

Through staying on top of business disruptions caused by technological advancements, geopolitical/economic uncertainties, new challenges impacting businesses (such as climate impact), changes in the risk–reward perceptions of investors, the hunger for growth of entrepreneurs, a dynamic legal and regulatory environment, and shifts in customer demands, equity finance has metamorphosed into a strategic advantage rather than just a capital-raising tool.

Understanding the trends and developments in this space is not only essential for investors and fund managers, but also for entrepreneurs, regulators and policymakers aiming to foster sustainable economic growth. In the sections below, the following topics are explored: recent trends in reverse flips, sectoral shifts in foreign direct investment (FDI), the emergence of REITs and infrastructure investment trusts (InvITs), public market support for large-scale funding and exits, greater market share of private credit and credit funds, a strengthened insolvency regime, India’s potential to be a global hub for manufacturing, fulfilment centres, capability centres and treasury centres, and opportunities fuelled by steady GDP growth, the demographic dividend, competitive infrastructure, a strong talent pool, favourable regulatory and tax regimes and steady domestic consumption.

Reverse Flips

Investments in Indian tech-backed industries and start-ups have been made by investors aggregated in an offshore holding company for an Indian operating company. Indian promoters set up offshore holding companies and flipped their holding from the Indian company to the offshore company. The commercial objective of such structures was to provide an exit to investors through an offshore IPO of the holding company. The underlying assumption is that offshore IPOs fetch better valuations. “Reverse flipping” has emerged as a recent trend.

A confluence of regulatory, economic and strategic factors, like simplified FDI norms, relaxation of the regulatory regime, reduced corporate tax rates, maturation of the Indian capital markets (leading to successful IPOs) and strong GDP growth has made listing in India attractive.

India currently has 112 unicorns, which have collectively raised over USD115 billion and command a combined valuation exceeding USD350 billion. Zerodha, Razorpay and Lenskart are among the most valuable unicorns according to a 2025 Inc42 report. Thus, as the start-up ecosystem matures, domestic and international investors are increasingly preferring Indian domicile for their investment entities, reflecting confidence in India’s legal, regulatory and tax framework.

Recently, Flipkart, the Indian e-commerce giant, announced its decision to relocate from Singapore back to India. This strategic decision aligns with Flipkart’s plan to capture the Indian public market, considering the broadening retail investor base and increasing appetite for IPOs. Other high-profile Indian start-ups and technology companies, like Zepto, Phonepe and Groww, have completed their reverse flips, while companies like Pine Labs, Razorpay and Meesho are considering similar relocations.

Shifting Trends in Sectoral Investments

FDI in India is witnessing significant growth in sectors like infrastructure, healthcare, pharmaceuticals, edtech and electronic vehicles (EVs), underscoring robust investor confidence in the long-term potential and rapid expansion of these dynamic sectors. As per a report published by Ernst & Young (EY) on private equity (PE) and venture capital (VC) trends, the focus on these sectors has been driven by government policy support, ongoing urbanisation, rapid digitalisation and the need for sustainable development. India’s growing infrastructure is backed by various government initiatives like the National Infrastructure Pipeline, projects valued at over USD11.26 million involving economic and social infrastructure, and PM Gati Shakti Yojana, focusing on enhanced logistics infrastructure.

From April 2000 to December 2024, the edtech sector in India received USD9.9 billion in FDI equity inflow, and in FY 2022 alone, Indian edtech start-ups secured USD3.94 billion across 155 deals, alongside the broader digitisation wave. FDI has increasingly targeted companies with verifiable learning outcomes, exportable content and partnerships with universities and corporates. The confluence of India’s digital public infrastructure and improved data protection norms supports continued FDI into edtech platforms that demonstrate profitable growth and regulatory compliance.

EVs have emerged as a strong magnet for FDI, supported by a combination of central and state-level incentives, policy frameworks promoting domestic manufacturing and a clear push for long-term market development. EVs and the automobile sector cumulatively drew FDI of about USD30–40 billion from April 2000 to December 2024, and it is expected that India will attract roughly USD40 billion in EV-related investments over the next 5–6 years.

Healthcare and pharma continue to attract capital due to increasing demand for affordable healthcare solutions and preventive care across all classes. FDI inflows into India’s drugs and pharmaceuticals sector stood at USD27.13 billion between April 2000 and March 2025. Hospitals and diagnostic centres have also pulled in heavy FDI amounting to USD 1.56 billion in FY 2025, up 2.3-fold since FY 2022. These trends suggest increasing investor confidence in both traditional and tech enabled healthcare, especially in diagnostics, specialised care, hospitals and scalable preventive health models.

As India continues to strengthen its regulatory framework and foster an enabling environment, FDI is poised to play a pivotal role in accelerating the nation’s transformation into a resilient, technology-driven and future-ready economy.

Emergence of InvITs and REITs

InvITs and REITs have emerged as credible investment options, providing investors with steady income and capital appreciation without the risk of investing directly in infrastructure or real estate. As per the projections of the Indian REITs Association (IRA) and the Bharat InvITs Association (BIA), the combined assets under management (AUM) of REITs and InvITs are expected to reach USD284 billion by 2030. While the distribution by REITS to unitholders has seen a 13% return year on year, amounting to more than USD2.76 billion, InvITs have distributed more than USD7.72 billion, including USD2.75 billion in FY 2025 alone. Together, InvITs and REITs have grown their combined AUM to USD93.9 billion in FY 2025, more than double the USD42.1 billion recorded in FY 2020.

The recent decision of the Securities and Exchange Board of India (SEBI) to classify REITs as “equity” for mutual fund investments is a welcome reform, in line with global best practices whereby REITs are included in equity indices. This decision will broaden investor participation and deepen the market for this asset class, in turn facilitating greater retail participation and supporting more efficient capital allocation. With REITs being eligible for inclusion in equity indices, developers may increasingly view them as a competitive and attractive capital-raising option, prompting them to pursue the REIT path.

Public Market Dynamics

As per the August 2025 report of EY/the Indian Private Equity and Venture Capital Association (IVCA) on PE/VC investments, over the last five years (since 2020), PE/VC-backed IPO exits have realised USD13.9 billion for PE/VC investors across 158 IPOs. In terms of sectors, financial services recorded the most PE/VC backed IPOs, both in terms of value and volume, followed by e-commerce. Technology secured the third rank, while healthcare and automotive secured the fourth and fifth ranks, respectively. These sectors have collectively accounted for 70% of PE-backed IPOs by value since 2020.

Fundraising through capital markets is also on the rise. The National Securities Depository (NSDL), India’s largest securities depository, raised USD450 million from its IPO in August 2025. JSW Cement, a major player in the cement industry, raised USD337.9 million in August 2025. Tata Capital, one of the largest non-banking finance companies, closed its IPO on 8 October 2025 and is expected to raise over USD2.25 billion on the back of the steady growth in demand for credit and the thriving financial digitisation environment.

The IPO pipeline looks impressive, and some of the largest and most impactful listings are in the works. Reliance Jio’s IPO is expected to be one of India’s biggest listings. With over 450 million users, Jio’s businesses include telecoms, over-the-top (OTT) platforms, retail, fintech and financial services. Its offer size is expected to be ~USD 4.5 billion. PhonePe, backed by Walmart, is a fintech ecosystem with more than 46% of the unified payments interface (UPI) market share. PhonePe (post the reverse-flip) proposes to raise ~USD 2.25 billion through its IPO. Other notable IPOs in the offing are Zepto, a quick commerce company with a large expected issue size, Wakefit, a direct-to-consumer (D2C) furniture and sleep solutions company, and Canara HSBC Life Insurance, a key player in the life insurance sector.

Evolving Role of Credit Funds and Private Credit

India is the world’s largest democracy and fastest-growing economy. High growth and regulatory constraints create a natural funding gap; coupled with founders’ demand for non-dilutive capital and a supportive creditor-led insolvency framework, this has led to a steady rise in credit financing, especially private credit, over recent years. A recent landmark deal, in May 2025, was Shapoorji Pallonji Group’s USD3.4 billion private credit fund raise, achieved through three-year zero-coupon rupee bonds with a yield of 19.75%, making it one of the largest private credit transactions seen to date in emerging markets. As per S&P Global’s September 2025 report on India’s private credit landscape, compared to the rest of the world, the private credit market in India is very small, with estimated assets under management of USD25–30 billion as of 31 March 2025, representing about 0.6% of India’s GDP and 1.2% of the overall corporate lending sector. There is thus huge growth potential in this space, as evidenced by the sharp surge in deal activity. As per EY’s report, total private credit deployment touched USD9 billion across 79 deals (each above USD10 million) in H1 2025, a 53% rise over H1 2024 and nearly three times higher than the H2 2024 level. Looking ahead, the dynamics suggest that credit funds and private credit will play an even more central role in corporate finance and capital markets.

Strengthening of the Insolvency Regime

The Insolvency and Bankruptcy Code (IBC) has redefined the resolution of financially distressed companies in India by establishing a structured and time-bound framework, thereby bolstering confidence among lenders and investors. With a view to further strengthening India’s insolvency and restructuring ecosystem, the IBC Amendment Bill, 2025, has recently been introduced to address the challenges faced during the implementation of the IBC. Key reforms include speeding up the timelines for admitting cases (to reduce delays in insolvency proceedings), introducing processes for the simultaneous resolution of group companies under common ownership/management and provisions for a cross-border insolvency framework, amongst others.

India as a Global Hub

The combination of super-skilled English-speaking talent, significant advantages in costs, and robust IT and logistics infrastructure has contributed to India becoming a preferred choice for setting up global capability centres (GCCs). GCCs have been set up in India across various industries, including technology, finance, asset management, automotive, retail and energy, to name a few. India is also emerging as a manufacturing hub, with the sector witnessing a 13% rise in investment (~USD 149 billion) compared to the previous decade and accounting for 17% of India’s GDP.

On data centres front, Jefferies estimates that capacity will quintuple to 8 GW in India over the next five years, driven by rising internet traffic. This expansion is estimated to require an investment of USD30 billion and will open up a range of downstream opportunities for real estate (USD6 billion), electrical and power systems (USD10 billion), racks (USD7 billion), cooling systems (USD4 billion) and network infrastructure (USD1 billion).

In total, 60% of data centres in India are located in Navi Mumbai, Noida, Gurgaon, Bangalore and Hyderabad. India’s first International Financial Services Centre, set up in Gujarat International Finance Tec‑City (GIFT City), Gujarat, is poised to be a game changer. It aims to encourage banking, financial services and insurance (BFSI), fintech, pharma, semiconductor, automobile and energy sector entities to set up their GCCs in GIFT City by providing a robust ecosystem to innovate and scale on the back of world-class infrastructure (including automated cooling and waste systems, underground utility tunnels and a walk-to-work ecosystem), policy incentives, tax incentives and talent accessibility.

For the same reasons, GIFT City is also an attractive destination for setting up global/regional treasury centres, and the regulator has projected treasury flows through GIFT City exceeding USD50 billion by 2030. GIFT City is also witnessing the relocation of offshore funds/feeders for tapping into Indian investments. As per statistics published by the GIFT City regulator (the International Financial Services Centres Authority) in June 2025, funds set up in GIFT City have raised cumulative commitments of USD22.11 billion and made cumulative investments to the tune of USD11.27 billion, with ~85% of the investment being directed towards India.

Conclusion

India’s equity finance landscape in recent years has demonstrated resilience amid global uncertainty, encouraged by domestic consumption, disciplined macroeconomic management, and decisive shifts in sectoral and technological priorities. Despite currency depreciation and tariff shocks in global markets, India’s PE/VC investments demonstrate sustained growth, supported by accommodative monetary signals, robust public market exits and a broadening investor base. In Q1 2025, PE/VC investments in India amounted to about USD13.7 billion, including buy-out and growth investments across a variety of sectors such as technology, infrastructure, fintech, health-tech and logistics, reflecting investor preference for growth‐oriented sectors as well as opportunities in the stressed assets space. The value of equity AUM for mutual funds has grown from USD663.4 billion in April 2024 to USD868.4 billion in September 2025, a span of 18 months. Mutual fund equity AUM grew by 7% in the quarter ending September 2025.

The government’s proactive approach to enhancing ‘ease of doing business’ and fostering capital market development has increased investor confidence and widened access to diverse financing options. Various sectors have consistently attracted equity finance, including manufacturing, infrastructure, data centres, renewable energy, real estate, hospitality, pharma, education, fintech, agritech, warehousing, logistics, financial services, etc.

In conclusion, the recent trends and developments in India’s equity finance landscape epitomise a market in transition, balancing the promise of a vast economy with the reality of a demand for global interconnectedness, taking into account domestic structural realities. The trajectory points towards greater sophistication, resilience and inclusivity in equity financing, reflecting India’s broader economic ambitions. India thus continues to remain a “sweet spot” in the global investment landscape.