The most significant challenge in Indian private equity today is not a lack of quality assets, but a profound lack of liquidity. A capital overhang estimated to exceed $100 billion is trapped in funds from the 2015-2020 vintage, a direct result of an exit mechanism that is no longer fit for purpose. As an investment banker specializing in the US-India corridor, I see the consequences daily in my conversations with US investors: their capital is stuck, and their confidence is waning. At Bardi Co., where we structure these transactions for the US-India corridor, we see this not as a cyclical fix, but a structural necessity: the GP-led secondary transaction.
For years, the Indian private equity model has relied on two primary exit routes: IPOs and strategic sales. While the IPO market has been a source of strength, it is a narrow gate, unable to accommodate the sheer volume of mature assets ready for an exit. Strategic sales have become sluggish, accounting for just $1.1 billion in exits in the first half of 2024, a fraction of the capital deployed in the preceding years. This has left a generation of high-quality, mature companies stuck in aging funds. Their managers, the General Partners (GPs), are caught in a difficult position, facing pressure from their Limited Partners (LPs) to return capital but unwilling to sell their best assets at a discount.
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The global secondary market assumes that lower-middle market Indian assets are too illiquid to price accurately. My thesis is the exact opposite: because they are ignored by mega-cap secondary buyers, these assets offer a 300-500 bps illiquidity premium that can be systematically captured through engineered continuation vehicles. The lower-middle market is underserved because global secondary funds lack the on-the-ground underwriting capability in India to price $50M-$100M assets. Traditional banks try to sell these assets one-by-one. My approach is to aggregate lower-middle market assets into thematic continuation vehicles, transforming single-asset illiquidity into diversified, institutional-grade yield.
The GP-led secondary, specifically the continuation vehicle (CV), provides the necessary structural release valve. The role of the advisor is to architect a transaction that allows a GP to move one or more of their best assets from an old fund into a new, purpose-built CV. We bring in new investors to capitalize this vehicle, giving the existing LPs a choice. They can either take cash and achieve their long-awaited liquidity, or they can roll their stake into the new vehicle to capture more upside. The transaction resolves the liquidity crisis for the old fund while creating a new, focused vehicle for continued growth.
Not the old world of distressed secondary sales, the GP-led CV is a tool for proactive, strategic portfolio management. It is how we can resolve the $100 billion overhang and, in doing so, restore the confidence of the global LPs who are essential to India’s future growth.
However, bringing this technology to India is not a simple copy and paste exercise.
Executing a GP-led deal in India is one of the most challenging assignments in investment banking today, requiring a unique blend of regulatory expertise, valuation discipline, and diplomatic skill.
The friction begins with the regulatory labyrinth. Any cross-border CV transaction collides with SEBI’s Alternative Investment Fund (AIF) rules, which do not yet recognize continuation vehicles as a distinct category. Structuring a single-asset CV requires registering a brand new Category II AIF, forcing a concentrated vehicle into a regulatory framework designed for diversified, multi-asset blind pools. Furthermore, if the CV is structured offshore, the transaction must navigate India’s notorious Indirect Transfer Tax (Section 9(1)(i) of the Income Tax Act), which taxes offshore transfers if the entity derives its substantial value from Indian assets. But the legal hurdles are secondary to the pricing challenge. In a nascent market for these transactions, there are no easy benchmarks. The advisor must create a transparent and defensible pricing framework. The tension between Net Asset Value (NAV) and the secondary market discount must be carefully managed, often requiring a Fairness Opinion to validate the pricing for all stakeholders. Crucially, this negotiated discount is legally constrained by the Reserve Bank of India’s FEMA pricing guidelines, which mandate a statutory Fair Market Value (FMV) floor for cross-border transfers. If the secondary discount pushes the price below the certified FMV, the transaction is illegal. This rigorous, independent valuation process becomes the foundation of trust for the entire deal, ensuring both the exiting LPs and the new investors are confident in the price.
The alignment of interests is the most delicate phase. The GP wants to keep managing their best asset, but the new investors demand that the GP has skin in the game—typically requiring them to roll over their carried interest. Meanwhile, existing LPs must be offered a genuine “Status Quo” option to roll their stake into the new vehicle without penalty, ensuring the transaction is not a forced squeeze-out. It is a high-stakes balancing act that requires absolute trust and transparency.
The good news is that global capital is already moving. The secondaries market hit $103 billion in the first half of 2025, with nearly half of that from GP-led deals. That capital is now looking for new frontiers, and India is squarely in its sights. We are seeing the first domestic players like 360 ONE Asset and Neo Asset Management raising dedicated secondary funds, and global giants like TR Capital are becoming more active.
For Indian GPs, mastering the continuation vehicle is no longer optional. It is the mechanism that will separate the managers who can deliver liquidity from those who merely promise it. The $100 billion overhang will not clear itself; it requires the deliberate, engineered unlocking that only the secondary market can provide. The GPs who master this tool first will define the next decade of Indian private equity.
Author: Kapish Sanga is an investment banking analyst at Bardi Co.
