India Leads APAC Private Debt Growth as Regional Fundraising Slows

India Leads APAC Private Debt Growth as Regional Fundraising Slows

The Asia-Pacific (APAC) region saw a slowdown in private capital fundraising in the first three quarters of 2024, with total funds raised at $77 billion, down from $83 billion over the same period last year, according to Preqin's latest report. Deal activity in APAC's private equity (PE) and venture capital (VC) markets has remained at a five-year low, reflecting a more cautious investment climate.

Despite this regional slowdown, India’s private debt market emerged as a strong performer within APAC. In Q3 alone, private debt fundraising in India reached $2.3 billion, more than doubling from $1.1 billion in Q2. India-focused and Asia-regional funds collectively accounted for nearly 70% of all private debt capital raised in APAC during 2024, underscoring investor confidence in India’s market for private debt. A significant portion of surveyed investors cited India as the leading emerging market for private debt opportunities, according to the report.

India’s private credit sector is nearing a notable milestone, with EY projecting investments to hit $10 billion in 2024. The EY Private Credit Pulse survey in September estimated that India’s private credit investments could rise to $5–10 billion within the next 12 months. Supporting this growth, the Securities and Exchange Board of India has already registered 13 new Alternative Investment Funds (AIFs) focused on private credit and special situations in H1 2024, and several more are pending approval.

Meanwhile, private equity fundraising in the APAC region fell significantly, with Q3 2024 figures at $7.1 billion, marking a 56.7% drop from the previous quarter. Venture capital fundraising also hit a new low, recording $3.9 billion in Q3, a 29.1% decline from Q2. Nearly a third of this funding was allocated to China-focused technology initiatives, such as Xiaomi Ventures' $1.4 billion Beijing Xiaomi Intelligent Manufacturing Equity Fund, which received backing from a government agency. These declines reflect broader market hesitancy and a concentrated focus on select managers and markets.

In contrast, Japan led APAC in private capital exits, reaching a five-year high in buyout volume. The country accounted for 37% of APAC’s private capital exits, benefiting from favourable conditions, low interest rates, improved corporate governance, and low competition for assets. Angela Lai, VP of Performance & Valuations at Preqin, noted that Japan’s active buyout market is expected to maintain steady valuation growth and a robust exit environment.

While investor sentiment in China remains cautious, a recent monetary stimulus triggered a stock market rally, opening potential opportunities for hedge funds in the region. Preqin’s report anticipates that telecom and renewable energy sectors will continue to drive deal activity within APAC as demand for 5G connectivity, artificial intelligence, and green energy rises.