India’s PE deal game is getting tougher for sellers

Mumbai: India's private equity (PE) market is increasingly demanding more safeguards from sellers, according to a Khaitan & Co study shared exclusively with ET. The research analyzed 265 PE and VC transactions in 2025. Sellers are facing greater scrutiny on price, performance, and potential future complications post-deal closure.

Purchase price settlements with adjustment clauses increased to 24% in 2025 from 13% the previous year, with 74% of these deals allowing post-closing adjustments. Shantanu Gupta, a partner at Khaitan & Co, noted that the PE ecosystem in India is maturing, characterized by structured processes, sharper negotiations, and alignment with global standards.

Despite global uncertainties and the rupee's decline to historic lows, the PE industry had one of its strongest years on record. Sellers are now asked to set aside a portion of the funds, with holdbacks rising to 19% of deals from 3% in 2024 and escrow arrangements increasing to 8% from 2%. Interim operating covenants, which restrict sellers' business operations before closing, are also more common, with their presence rising to 88% from 63%.

Non-compete and non-solicit clauses have become more prevalent, appearing in 80% and 77% of deals respectively, and buyers are increasingly granted the right to withdraw from deals if new disclosures reveal issues, a trend that saw a significant rise from 19% in 2024 to 77% in 2025. The PE market is becoming more structured and aligned with global deal standards, with technology, manufacturing, and sectors like pharma, retail, and real estate attracting significant capital.