Gulf strikes changing rules behind India’s big-money bets

Meanwhile, the Economic Times daily newspaper is available online now.

Key points

• (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.).
• India Private Equity Investment 2026: Geopolitical risks now shape private equity accord considerations in India.
• According to an IVCA-Bain report, private equity and venture capital (PE-VC) investments declined approximately 17%, hitting $36 billion in 2025.
• The downward trend in PE investment volume is echoed in the Deloitte India supplement to the Asia Pacific Private Equity Almanac.
• A missile strike in West Asia rarely stops a private equity (PE) accord in Mumbai.

Meanwhile, the Economic Times daily newspaper is available online now. Strikes in the Gulf changing rules behind India's big-money bets. Strikes in the Gulf changing rules behind India's big-money bets. ET OnlineLast Updated: Aug 21, 2026, 10: 51: 00 AM IST.

India Private Equity Investment 2026: Geopolitical risks now shape private equity accord considerations in India. Investors increasingly focus on resilience and supply-chain stability for investments. Capital deployment concentrates on manufacturing and financial services sectors. Export-oriented businesses still attract interest despite US tariff uncertainties. India remains an attractive destination due to its market scale and policy backing.

For context, a missile strike in West Asia rarely stops a private equity (PE) accord in Mumbai. But it can reshape the questions investors ask before signing one. From freight costs to tariff exposure, geopolitical developments that once sat at the margins of investment committees are now shaping how global and domestic funds deploy capital in India. The result is not a pullback in investment, industry executives say, but a growing emphasis on the R-factor: resilience. India's private equity market entered 2026 with solid macroeconomic fundamentals, including moderating interest rates, resilient consumption and continued administration spending, according to IVCA-Bain India Private Equity Report 2026.

Even so, investors say geopolitical risks have become a more prominent consideration in private equity decision-making. "Geopolitics applied to be one line in a agreement memo. Today it has a section of its own, " Ankit Kedia, Founder and Lead Investor at Capital-A informed ET Online. Selective capital, not scarce capital.

According to an IVCA-Bain report, private equity and venture capital (PE-VC) investments declined approximately 17%, hitting $36 billion in 2025. While VC and expansion capital expanded roughly 18%, partially offsetting the PE decline, over the year, traditional PE activity contracted around 33%. Live Events.

In practice, the downward trend in PE investment volume is echoed in the Deloitte India supplement to the Asia Pacific Private Equity Almanac. It notes that while overall accord volumes moderated in FY25, investors concentrated capital into fewer but larger, higher-conviction transactions. In FY25, accord volumes declined by 8%, even so total transaction value rose by 23%. "Uncertainty doesn't kill deals, it may slow them down and create everyone more selective. But funds are still deploying and good assets will always find buyers, " Nidhi Killawala, Partner at Khaitan & Co. Informed ET Online. Nevertheless, India continued to account for around one-fifth of Asia-Pacific PE investments despite broader regional moderation, IVCA-Bain PE report stated, indicating that investor interest remains intact even as dealmaking has become more measured.: After making inroads into healthcare, private equity players are targeting India's schools India Private Equity in 2026: A quick glimpse on sector concentration of latest PE deals and factors impacting India's big-money bets.

Notably, the report expects capital deployment in 2026 to remain concentrated in domestically aligned sectors such as manufacturing and industrials, financial services, and consumer and retail – backed by resilient domestic demand, government-led production-linked incentive (PLI) schemes and global supply-chain diversification. As external risks have become "more front and centre" for financial sponsors, scenario planning and resilience assessments have become an integral part of investment decisions, according to Dhruv Shah, Managing Director and Partner at Boston Consulting Group (BCG). Export-oriented sectors such as pharmaceuticals, contract development and manufacturing (CDMO), auto components and precision engineering continue to attract investor interest despite tariff-related uncertainty. Electronics manufacturing and medical devices are additionally drawing attention as India's self-reliance agenda gathers momentum. While firms heavily dependent on cross-border supply chains or operating on thin margins are finding capital harder to secure, Killawala stated, meanwhile, investors are increasingly backing businesses with "defensive" domestic characteristics. Yogesh Singh, Partner at Trilegal, echoed this view, noting that sectors more exposed to global technology spending, tariff uncertainty and valuation resets have witnessed slower investment activity. How a PE accord itself has changed.

PE advisers say due diligence has expanded well beyond financial performance and legal compliance to include supply-chain resilience, tariff exposure, sanctions risks, customer concentration and business continuity planning alongside traditional financial metrics. Transaction structures are evolving as well. According to Killawala, investors are increasingly relying on earn-outs, deferred consideration, stronger material adverse change (MAC) clauses and sanctions-related protections to distribute geopolitical risks between buyers and sellers instead of simply discounting valuations. Founders are now projected to answer basic but critical questions early in the investment process: "Where do your parts come from, where do you sell, and what happens to you if that route shuts on a Monday morning?" Supplier mapping, alternative sourcing strategies and supply-chain contingency planning, Kedia stated, have become standard components of due diligence rather than optional exercises. Notably, the legal scrutiny has additionally widened. According to Trilegal's Singh, investors are now evaluating sanctions compliance, payment flows, shipping routes, raw-material availability, energy cost pass-through and regulatory approvals much earlier in transactions. Foreign investment screening, merger-control thresholds and beneficial ownership assessments are additionally assuming greater importance in cross-border deals.: India's family offices prepare for $1.5 trillion wealth transfer Why India remains attractive despite the risks.

For context, the IVCA-Bain report points to sustained investor confidence in India as a PE destination. While Temasek's India exposure has reached around $50 billion with further expansion planned, KKR has indicated intends to deploy up to $20 billion in India over the coming decade. Domestic fundraising has additionally strengthened, led by ChrysCapital's $2.2-billion Fund X, the largest India-focused private equity fund raised to date. Meanwhile, limited partners (LPs), or institutional investors who provide capital to PE funds, are placing greater emphasis on distributions, exit visibility and fund managers' execution capabilities, reflecting a more performance-oriented investment environment. For plenty of investors, India's growing role in global supply chains has moved beyond a temporary China+1 opportunity. "We see it as structural rather than a moment, " remarked Kedia, adding that India is evolving from being viewed as a hedge against China into a genuine manufacturing alternative, backed by PLI-led capacity expansion, a maturing components ecosystem and founders increasingly building businesses for global markets. While cautioning that India must continue strengthening component-level manufacturing, precision engineering capabilities and skilled talent to retain that advantage, "The move from India as a hedge to India as a real alternative is what makes us treat this as structural, " he remarked. Industry participants say export-oriented manufacturing continues to benefit from this shift. They believe India's combination of domestic demand and policy continuity continues to distinguish it from other emerging markets. Singh remarked India remains an attractive destination as of its market scale, manufacturing depth, digital infrastructure, improving exit avenues and policy backing. Meanwhile, he continued that India's regulatory framework has evolved alongside geopolitical developments, with changes to foreign investment screening, merger control thresholds and beneficial ownership rules making regulatory preparedness an increasingly notable part of transaction planning. What investors are doing differently.

"Geopolitical risks have shifted from being viewed as external macroeconomic events to becoming core investment considerations during private equity decision-making, " remarked Nishesh Dalal, Partner and Private Equity Leader, South Asia, Deloitte. The Deloitte India report argues that investors are taking a more active role in operational transformation, governance improvements and long-term value creation. Although exit volumes declined in FY25 trade sales surged, suggesting investors are prioritising valuation discipline over quicker exits. According to Srinath Srinivasan, Chief Investment Officer, Alternative Markets at Equirus Capital, events such as the Red Sea disruptions, rising freight costs, tariff uncertainty and fluctuating energy rates have changed how investors evaluate businesses. Average private equity cheque sizes have fallen as funds increasingly favour smaller, lower-risk investments over sizeable bets. While numerous Indian firms are diversifying towards domestic markets to reduce exposure to global trade volatility, in an interview with ET Online, Srinivasan observed that investors are increasingly stress-testing businesses against multiple tariff scenarios rather than relying on a single assumption. "The old edge was spotting the right asset; today it is just as often getting the deal past the regulators, " Khaitan & Co's Killawala remarked.: KKR buys stake in BookMyShow for $40 million A more disciplined era for private capital.

Meanwhile, the defining shift in India's private equity landscape is not that capital has disappeared. Rather, capital has become more discerning. Yet India's fundamentals continue to attract global capital. For PE firms, the challenge in 2026 is no longer simply identifying high-growth businesses. It is identifying firms capable of delivering that expansion through an increasingly unpredictable world. Add Now!

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Taken together, the developments around gulf strikes changing rules behind India's big point to a situation that is still moving, and the coming days should bring more clarity.