Navigating PE exits from India: Regulatory hurdles, structural optimisation and deal certainty

Introduction

Private equity investing is ultimately judged at exit. While entry valuation and value creation shape the investment thesis, returns are realised only when an investor successfully converts value into liquidity. In today's Indian market, the critical question is no longer whether exit opportunities exist, but whether an investment has been structured, governed and documented to capitalise on them when they arise.

The backdrop is favourable. According to EY-IVCA[1], Indian PE/VC exits increased from US$24.9 billion in 2023 to US$28.2 billion in 2024 and US$32.9 billion in 2025, the second highest annual exit value on record. Together, 2023-2025 accounted for approximately US$86 billion of exits, representing about 41% of total exit value generated between 2016 and 2025. Liquidity has also become more diversified, with strategic sales, sponsor-to-sponsor transactions, IPOs and public market sell downs all emerging as meaningful exit routes.

At the same time, executing an exit has become more complex. Tax scrutiny, competition law review, foreign exchange regulations, sector specific approvals and public market requirements can each influence transaction timing, value and certainty. As a result, exit readiness is no longer a consideration reserved for the point of sale. It is a discipline that must be maintained throughout the investment lifecycle to preserve optionality and maximise value.

This article examines the evolving exit landscape for PE investors in India, the key regulatory and structural issues that should be addressed well before an exit process is launched, and the practical considerations that can affect deal certainty across the principal exit routes available to investors.

Regulatory and tax overlay: The first exit screen

Before selecting an exit route, a sponsor should identify the regulatory and tax issues that could affect transferability, pricing, timing or net proceeds. These issues are not merely closing mechanics: in a competitive process they can directly influence bidder appetite and valuation.

Tax structure, treaty entitlement and substance. Investment vehicles should be able to demonstrate commercial rationale, genuine decision making and alignment between legal ownership and economic risk. The Supreme Court's Tiger Global decision sharpened attention on anti-avoidance and substance, although the CBDT subsequently amended the GAAR rules on 31 March 2026 to clarify protection for income arising from transfers of investments made before 1 April 2017.[2] For post-2017 structures, and for issues outside that grandfathering, substance and contemporaneous governance evidence remain central.

FEMA, FDI and sectoral regulation. Cross border share transfers should be screened for applicable entry route conditions, sectoral caps, government approvals, pricing guidelines and reporting requirements. Where a prospective buyer is linked to a country sharing a land border with India, the applicable foreign investment approval regime can become a threshold execution issue and should be tested before a bidder is admitted to the final stage of a process.

Competition law. The Competition Act analysis should be undertaken early, particularly for large strategic or sponsor buyers with overlapping businesses or significant India exposure. In addition to the traditional asset and turnover thresholds, the deal value threshold can require CCI approval where transaction value exceeds ₹2,000 crore and the target has substantial business operations in India. In an auction, different bidders can therefore present materially different antitrust timelines and remedies risk.[3]

Public-market regulation. Where the target is listed, or an IPO/open market exit is contemplated, SEBI requirements can affect offer for sale eligibility, lock-ins, disclosure, takeover thresholds, open offer obligations, insider-trading controls and the timing of sell downs. These matters should be mapped before an exit timetable is committed to the board or fund investment committee.

Key exit routes and strategic considerations

Strategic sale

Strategic buyers remain important exit counterparties because they can often underwrite synergies that are unavailable to a financial sponsor market access, technology, distribution, vertical integration or sector consolidation. That can support a control premium and, in the right asset, a cleaner path to a full exit. Strategic exits were the largest exit category in India in 2025, reaching approximately US$15.9 billion across 82 transactions.[4]

Recent transactions illustrate the depth of this route. Advent International's sale of Bharat Serums & Vaccines to Mankind Pharma for approximately US$1.6 billion was the largest reported exit of 2024[5]. In 2025, strategic exit value was lifted materially by Temasek's approximately US$6.4 billion exit from Schneider Electric India[6]. These transactions also underline an important feature of sponsor exits, i.e., scaled, well governed assets can attract buyers willing to price strategic value rather than merely financial return.

Preparation should focus on matters likely to be tested intensively by a strategic acquirer: regulatory licences, related party arrangements, change of control consents, management depth, key contracts, ESG issues, tax positions, internal controls and the quality of financial reporting. A clean vendor diligence exercise, a well organised data room and early identification of consent requirements can materially improve both price tension and execution certainty.

Competitive auction sale

For a sponsor seeking price discovery and execution discipline, a controlled auction can be more effective than a bilateral sale. The process can bring strategic and financial bidders into direct competition, reduce dependence on a single counterparty and allow the seller to compare not only headline price but also conditionality, regulatory risk, financing certainty and the proposed allocation of deal risk.

A well-run auction is typically sequenced. In this regard, the process design can materially affect value. Vendor due diligence and a seller prepared disclosure package can reduce repetitive diligence and information asymmetry, warranty and indemnity (W&I) insurance can shift much of the business warranty risk away from a fund seller, carefully managed management presentations can preserve competitive tension, and limited exclusivity should generally be granted only when a preferred bidder has demonstrated both value and closing certainty. Where regulatory risk differs meaningfully between bidders, the seller may also seek reverse break fees, specific regulatory efforts covenants, tightly drafted long-stop dates and restrictions on financing conditions.

The central objective is not simply to obtain the highest headline bid. In Indian transactions, a marginally lower offer may be superior if it carries lower antitrust or foreign investment risk, fewer third-party consents, committed financing, narrower conditions precedent and a cleaner liability package. Auction strategy should therefore rank bids on risk adjusted proceeds and probability of completion, not price alone.

Initial Public Offering (IPO)

India's public markets have become a credible and increasingly sophisticated liquidity avenue for PE-backed businesses as they can deliver valuation discovery and liquid currency for subsequent sell-downs but usually produce a staged rather than immediate full exit. The recent data is significant: PE-backed IPO exits increased from approximately US$1.4 billion in 2023 to US$3.3 billion in 2024 and US$3.9 billion across 42 IPOs in 2025.[7]

The recent pipeline also provides several concrete sponsor exit examples. Carlyle's February 2025 IPO of Hexaware Technologies was an ₹8,750 crore, entirely offer for sale issue. Carlyle retained a substantial stake after listing, illustrating the staged monetisation model.[8] Dr. Agarwal's Health Care followed in January 2025 with a roughly ₹3,027 crore IPO, including an approximately ₹2,727 crore OFS in which PE investors associated with TPG and Temasek were among the selling shareholders.[9] In May 2025, Brookfield backed Schloss Bangalore, owner of The Leela luxury hotel brand, completed a ₹3,500 crore IPO that included a ₹1,000 crore OFS by the Brookfield selling entity.[10] The route has continued into 2026, for instance EY-IVCA identified the Fractal Analytics IPO as the largest exit in February 2026, with Apax, TPG and other investors selling an approximately 11.5% stake for about US$196 million.[11]

These examples demonstrate why IPO readiness must be treated as an operating programme, not merely a transaction workstream. Merchant bankers, legal advisers, auditors and regulators will scrutinise historical capital issuances, offer for sale eligibility, lock-ins, promoter and promoter group classification, ESOPs, related party transactions, material contracts, regulatory licences, litigation, internal controls and the quality of financial reporting. Remediation that begins only after bankers are appointed can compress timelines and reduce flexibility.

The governance transition is equally important. Board nomination rights, reserved matter vetoes, enhanced information rights, anti-dilution protections and bespoke liquidity rights that are commonplace in private companies may need to fall away or be reshaped for a listed environment. Sponsors should therefore model not only the IPO itself but the post-listing sell down pathway, including lock-in periods, block or bulk trades, OFS windows and the information barriers required to avoid being constrained by unpublished price sensitive information.

Post-IPO Open-Market Sell-Downs

Open market exits have been one of the most important liquidity channels in the recent cycle. EY-IVCA recorded approximately US$12.8 billion of open market exits in 2023 and US$12.9 billion in 2024.[12] Even in the softer first half of 2026, open market exits accounted for US$4.1 billion, or 44% of total exit value.[13]

For a PE investor, the advantage is flexibility, stakes can be monetised in tranches rather than through a single control transaction. The tradeoff is exposure to market windows and securities law constraints. Sell down planning should therefore take account of lock-ins, minimum public shareholding, takeover thresholds, disclosure obligations, trading window restrictions and the risk that access to board information may delay execution. A sponsor contemplating a public market exit should decide early whether continued governance rights are worth the potential loss of trading flexibility.

Secondary sales

Sponsor-to-sponsor transactions remain an important route where a business has further growth runway but the incumbent fund has reached the end of its preferred holding period. They can provide a cleaner transfer of control than an IPO and may be particularly attractive where a new sponsor can underwrite the next phase of expansion, consolidation or internationalisation. Recent examples include Blackstone's approximately US$950 million stake sale in VFS Global to Temasek[14] and ChrysCapital's approximately US$860 million sale of GeBBS Healthcare Solutions to EQT[15].

The principal documentation issue is transferability of the investment package. A transfer right that permits sale of shares but leaves board rights, information rights or other governance protections subject to promoter consent can materially reduce secondary value. Investment documents should therefore specify which rights travel with the securities, subject to objective ownership thresholds, and should limit discretionary consent rights that can be used to frustrate a bona fide institutional transfer.

Asset sales and carve-out transactions

Carve-outs can be effective where the sponsor or portfolio group is monetising a division, regulated business, infrastructure asset or non-core vertical rather than the entire holding company. They may also be driven by regulatory requirements or group restructurings. HDFC Credila's sale to BPEA EQT[16] and ChrysCapital and Brookfield's acquisition of American Tower Corporation's India tower business[17] are useful examples of transactions in which regulatory or portfolio considerations supported a business level separation.

Execution is often more complex than a share sale because value must be separated operationally as well as legally. Sponsors should identify the transfer perimeter, licences, employees, contracts, shared services, intellectual property, debt, tax attributes and stranded costs at an early stage. Transitional services, consents and separation mechanics can become the critical path, and the structure should be tested for tax and stamp duty leakage before a sale process is launched.

Buybacks

Buybacks can provide targeted liquidity where the company has adequate financial capacity and promoters or continuing shareholders wish to consolidate ownership. They are, however, constrained by company law requirements, funding and leverage considerations, and for cross-border investors, the applicable foreign exchange and pricing rules.

The tax position has also changed materially. From 1 April 2026, buyback consideration is again taxed as capital gains in the hands of shareholders under the revised framework, replacing the deemed-dividend treatment that applied between 1 October 2024 and 31 March 2026. The 2026 changes also impose an additional tax component for promoter shareholders. A buyback should therefore be compared on an after tax basis against a secondary sale, strategic sale or market sell down rather than treated as a mechanically simpler substitute.[18]

Exit readiness and deal certainty

The common thread across each exit route is that contractual exit rights alone do not create liquidity. The quality of the underlying asset, the regulatory record and the seller's ability to run an executable process often matter more than the breadth of a drag, put or IPO clause negotiated at entry. Against this backdrop, sellers and sponsors should focus on a few practical measures to pressure exit optionality and reduce execution risk.

·         Maintain multiple live pathways. Exit routes should be reassessed periodically against business performance, market conditions, fund life and the likely buyer universe.

·         Undertake periodic regulatory health checks. Corporate, foreign exchange, tax, sectoral and competition law issues should be identified before a process becomes time critical, with remediation plans for known gaps.

·         Keep the capital structure clean. Capital structures, historical issuances, shareholder arrangements and inter-company balances should be simplified where possible. Complexity that appears manageable during the holding period can become a valuation discount at exit.

·         Design the liability package early. For sponsor-led sales, liability should be ring-fenced as far as commercially feasible: PE sellers should ordinarily stand behind title and capacity, while business warranties are supported by management/promoters and, where available, W&I insurance.

·         Protect process control and transferability. Transfer provisions should allow a credible exit process to be initiated and completed without avoidable veto points, while governance rights should be capable of travelling to an institutional transferee where appropriate.

·         Measure risk adjusted value, not just price. Bid evaluation should consider the certainty of funds, regulatory approvals, conditions precedent, transaction document mark-ups and realistic closing timetable alongside headline valuation.

Conclusion

India's exit market has become deeper and more varied. The 2023-2025 period produced approximately US$86 billion of PE/VC exits and demonstrated sustained liquidity across public markets, strategic sales, secondaries and sponsor-backed IPOs.[19] While the first half of 2026 has been more subdued, the range of available channels remains materially broader than in the earlier part of the last decade.[20]

For PE investors, the implication is straightforward: exit success is increasingly built before the formal exit process starts. A business with clean regulatory history, credible governance, transferable investor rights, a simplified capital structure and more than one executable route to liquidity will generally be better positioned to preserve value and deal certainty. The strongest exit right is therefore not a clause in isolation, but it is the combination of contractual leverage, regulatory preparedness and strategic optionality maintained throughout the investment lifecycle.

[The authors are Executive Partner, Partner and Principal Associate, respectively, in Corporate and M&A practice at Lakshmikumaran & Sridharan Attorneys]

---

[1] Private Equity and Venture Capital Trendbook 2026, available at < Private Equity and Venture Capital Trendbook 2026>, last accessed on 24 August 2026.

[2] CBDT amends Income Tax Rules to clarify GAAR grandfathering provisions, available at < CBDT amends Income Tax Rules to clarify GAAR grandfathering provisions | EY - India >, last accessed on 24 August 2026.

[3] FAQs on Combinations, available at < FAQs / guidance on combinations>, last accessed on 24 August 2026.

[4] Supra 1.

[5] PE/ VC Investments in India in 2024 cross US$ 56 billion helped by an all time high volume of 1,352 deals, available at < 2024 PE/VC Investments Cross $56B, 1352 Deals | EY - India >, last accessed on 24 August 2026.

[6] Temasek's approximately US$6.4 billion exit from Schneider Electric India, available at < Temasek to exit India JV with Schneider Electric for $6.35 bn >, last accessed on 24 August 2026.

[7] Supra 5.

[8] Carlyle Announces the Listing of Hexaware Technologies, the Largest Technology Services IPO Globally in Over a Decade, available at < Carlyle Announces the Listing of Hexaware Technologies, the Largest Technology Services IPO Globally in Over a Decade | Carlyle >, last accessed on 24 August 2026.

[9]  Prospectus- Dr. Agarwal's Health Care Limited, available at <1738575559192.pdf>, last accessed on 24 August 2026.

[10] India's Schloss, Aegis Vopak IPOs fully sold on final day, retail demand subdued, available at <India's Schloss, Aegis Vopak IPOs fully sold on final day, retail demand subdued | Reuters>, last accessed on 24 August 2026.

[11] India PE/VC investments stay subdued at US$3.7 billion across 109 deals in February 2026, available at < India PE/VC investments stay subdued at US$3.7 billion across 109 deals in February 2026: EY-IVCA Report | EY - India>, last accessed on 24 August 2026.

[12] Supra 5.

[13] PE/VC investments in India reach US$20.5 billion across 604 Deals in 1H2026: EY_IVCA Report, available at <PE/VC investments in India reach US$20.5 billion across 604 Deals in 1H2026: EY-IVCA Report | EY - India >, last accessed on 24 August 2026.

[14] Temasek picks 17-18% stake in VFS Global for $950 million, available at < Temasek picks 17-18% stake in VFS Global for $950 million | M&A Critique >, last accessed on 24 August 2026. 

[15] ChrysCapital sells its Stake in GeBBS Healthcare To EQT, available at <­­­­­­ChrysCapital Sells Its Stake In GeBBS Healthcare To EQT - BW Businessworld >, last accessed on 24 August 2026. 

[16] BPEA EQT, ChrysCapital Strike $1.3 billion deal for HDFC Credila, available at <BPEA EQT, ChrysCapital strike $1.3 bn deal for HDFC Credila>, last accessed on 24 August 2026. 

[17] Brookfield agrees $2.5bn deal to acquire American Tower India, available at <Brookfield agrees $2.5bn deal to acquire American Tower India - DCD>, last accessed on 24 August 2026. 

[18] Section 69 of the Income Tax Act, 2025 (inserted vide The Finance Act, 2026 (Act 4 of 2026) with effect from 1 April 2026).

[19] Supra 1.

[20] Supra 11.