- Hi, I am Devadatta Rajadhyaksha, formerly the Finance Controller at Kedaara Capital, one of the largest homegrown Private Equity Funds.
- After a decade in the sector, it’s clear: India’s PE/VC scene is on fire, with AIF capital commitments soaring to an astonishing ₹11.8 lakh crore.
- Here is how this explosive growth is creating huge opportunities for finance professionals.
Back story: From a CA Firm to a PE Firm
After spending the initial part of my career with IT consulting companies, I have been practising as a Chartered Accountant for over three years.
Somewhere in late 2010, I was fortunate to work with two of Kedaara’s co-founders on their personal tax matters.
As they were in the process of founding Kedaara with the third co-founder, we had a conversation.
That’s when I learned about Kedaara’s vision and thought this was a game-changer in the Indian PE ecosystem.
Now here is the interesting part, when I joined Kedaara, I didn’t know much about the PE world, apart from a few, generic concepts. Most of it was learned on the job.
What Kedaara did differently was, ensuring value addition to the portfolio companies. It wasn’t just a case of deploying capital; it was about helping portfolio companies with strategic guidance and ecosystem connections.
And I think that helped in the journey.
Fast forward to 2022, almost 11 years later I took up the CFO role at Lumikai, India’s pioneering interactive media and gaming VC fund.
In 2024, I noticed a surge in PE and VC funds and an increasing demand for advisory services.
And I decided to start my firm and founded Serendipity Fund Advisors.
Also read: What is Private Equity? Everything you need to know about this popular career field.
Indian PE/VC landscape
Back in 2011, PE had already established a significant presence in India.
However, most of the early entrants were global PE funds that were looking at the Indian market. Initially, the capital raised was primarily global capital.
Today there are many types of PE and VC funds:
- Global funds, looking to diversify their portfolios in India.
- Homegrown Indian PE funds, that are well aware of how the Indian business ecosystem functions and are, therefore, in a really good position to help both the portfolio founders and the investors.
- Sector-specific PE funds. Real estate is a prime example. Apart from that, some funds specifically invest in, tech or pharma, or in new-age sectors like interactive media.
- Sector-agnostic funds will invest in almost every sector except maybe one or two specific sectors in which they don’t have a lot of expertise.
- Impact investing funds
- While all of these are forms of equity, venture debt funds are also a key component of the ecosystem.
Growth in Alternative Investment Funds (AIFs) in India
- 2024: About 1,400 Alternative Investment Funds (AIFs) registered in India.
- 2020: This number was around 650 just four years ago, so it has doubled in that time.
It’s important to note that these figures only reflect AIFs.
Many PE funds investing in India might also have investment vehicles in other jurisdictions, such as Singapore, for various reasons.
Rise in commitment from investors
- 2024: Commitments are about INR 11. 8 lakh crore.
- 2020: Commitments were just under INR 4 lakh crore.
The growth in commitments (3x) is faster than the growth in the number of AIFs (2x), indicating that AIFs are significantly boosting their fundraising capabilities.
Overall, the number of funds and the capital they can raise and deploy have been growing significantly.
Hotspots for PE/VC: Mumbai, Bangalore, Delhi NCR.
Emerging Cities for PE/VC in India: Ahmedabad (GIFT City), Hyderabad, Chennai, Jaipur, Pune.
Also read: Private Equity money is pouring into US CPA Firms. Surge in offshoring to India?
The meteoric rise in PE and VC investments in India
The depth of the market is enabling funds to deploy more confidently. Businesses are growing and seeking additional capital. The robust growth of the Indian economy has contributed to the expansion of PE-VC funds as well.
Good exit opportunities. Because of the flourishing market, funds are confident that if they back a company and the company is doing well
- They can take the company to an IPO.
- There could be strategic acquisition opportunities.
- Other PE funds looking to invest at a later stage could acquire their stake at a higher valuation.
The robust depth of the market is instilling significant confidence in private equity and venture capital funds.
It encourages them to invest in and support companies that are looking for growth (PE) or startup capital (VC).
Investors are more willing to invest in alternative asset classes. Not only global investors but, increasingly, domestic investors such as HNIs and family offices are also. I observe an all-round growth in the ecosystem from the investors’ side as well as from the portfolio founders’ side.
A notable trend is the return of experienced global PE/VC professionals to India to establish their funds. This is a positive sign for the industry,
GIFT City is emerging as a potential game-changer, with increasingly investor-friendly regulations that could attract both domestic and foreign investment.
Looking ahead, the PE/VC sector is set for substantial growth over the next decade and beyond.
Opportunities for finance professionals in the PE / VC sector
A lot of opportunities exist for finance professionals in the PE-VC ecosystem.
VC or PE funds would require several types of services that finance professionals will be in a good position to provide.
Valuation
VC and PE funds invest in portfolio companies. Some are:
- Profitable
- Not profitable yet, but they are earning revenue
- Not even earning revenue, but they have products in place
- Still pre-product
The valuation methods for these companies are going to be different.
It would require finance professionals with a lot of expertise in valuation techniques and processes to help the PE or VC funds.
So that’s one opportunity for many finance professionals, whether they are practising chartered accountants or merchant bankers.
Valuations can be split into two parts:
- One is before a fund invests in a company. For regulatory reasons, you would need a valuation certificate.
- And secondly, once you have invested, on an annual or semi-annual basis, you would need valuation reports for your audits and investor reporting.
Compliance
Compliance is a significant opportunity for finance professionals, including, let’s say, both CAs and Company Secretaries.
Here is why:
Now, India’s compliance landscape is becoming more investor-friendly. However, with numerous laws for funds and their investments, strict compliance from day one is essential.
For instance:
- Since, you are working with a regulator like SEBI, or IFSCA, its reporting requirements are something you have to keep in mind.
- If you are receiving capital from foreign investors, then Foreign Exchange Management Act (FEMA)requirements also need to be kept in mind.
- Apart from routine taxes like income tax or GST, there are specific aspects, for example, angel tax. This is something all VCs need to keep in mind.
All these challenges provide many opportunities for finance professionals to help with compliance for PE/VC funds.
Fund Administration for Private Equity / VC
Now, PE funds typically outsource their fund administration activities to a third-party provider. Doing it in-house is not very common, I would say.
Traditionally, larger fund administrators, who have deployed bespoke software over the years, have been doing this and continue to be significant players in the market.
But what we have also seen in the last decade or so is homegrown fund administrators starting from a smaller base. They are equally agile and are here to support the funds they are working with.
They are also providing these services, and that could be an opportunity for finance professionals as well.
Fractional CFO Services for PE / VC funds
There is an entire gamut of services something a CFO would typically handle for a fund:
- Finalizing the fund structure, depending on various factors such as nature of investments, type of investors, etc.
- Incorporating various entities and coordinating with relevant regulators for registration of the fund.
- Coordinating with fund counsel and tax advisors on fund documents such as Private Placement Memorandum, Shareholders’ Agreement, etc.
What happens, especially for smaller funds, is that the founders of the fund – known as general partners (GPs) end up doing the heavy lifting.
Whereas the GP should be spending the majority of their time on fundraising or finding deals to deploy.
The reason why they may not want a full-time CFO is that the work is not linear in the formative stages of the fund.
Also, until you raise capital or have significant visibility on your fundraising, attracting talent could be a challenge for smaller funds initially.
To address this white space, we are building Serendipity Fund Advisors. We hope to provide VC and PE funds with outsourced fractional CFO services in their 0 to 1 journey.
Once they have closed the fund and would require a full-time CFO or Controller, we would help in the hiring process and induct the CFO/ FC – a classic build, operate, transfer model.
How to make an entry in the PE / VC space?
I have to admit PE / VC space is an ecosystem with limited entry points, but it is a fantastic industry to work in.
Networking and Relationships: One of the main ways to enter the VC or PE fund space is through personal connections. If you’re working with a family office who decides to start their fund, you’re in a great position to help given your understanding of the individuals and their investing philosophy.
Lateral moves through service providers: Another entry point is through lateral movement. For example, if you’re working with a law firm that has funds as clients, you’ll gain an understanding of fund structuring and documents, which can help you move directly into the fund space.
Experience in related fields: If you’re a CA or MBA working at a Big 4 firm, you might be involved in M&A or providing tax advice to fund clients, which can lead to opportunities in a fund. Similarly, if you’re a CFA working in investment banking, your experience on the buy-side or sell-side could help you transition into a role in a PE fund.
Wrapping up…
We started our fund advisory startup, Serendipity Fund Advisors about a month ago.
I expected to spend the first few months just raising awareness and learning about the market.
Surprisingly, we’ve already started working with one client and are in talks with a couple more. So the opportunity is HUGE.
