Plus factors such as GDP growth, policy reforms attract PE funds

India has been a favored Asian destination for foreign private equity (PE) funds, contributing significantly to the country's emergence in the past decade. But some experts warn that high PE returns may be a thing of the past.

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A multitude of events have shaped the investment climate. India's growing global stature, a more open economy and positive indications of reform have encouraged PE investment inflow over the years.

A KPMG report, Returns from Indian Private Equity, said that over the past decade, India has been among the most important emerging markets for PE after China, and often competes favorably with it.

"Lower dependency on leverage as compared with developing markets has really made India a safe PE destination," says Ashutosh Dash, assistant professor of finance at the Gurgaon-based Management Development Institute.

"Alongside the GDP growth, market-based growth environment with attractive sustainable socioeconomic environment and regulatory regime are vital factors in making India a hub for PE investments," he says.

Venture Intelligence, a PE database in India, indicates that the number of deals from 2000 to 2006 was 1,015, involving more than $14 billion, which went up to 1,306 during 2007 to 2009, with a total volume of almost $29 billion.

Recent years delivered another leap in the numbers. From 2010 to 2013, India witnessed a record PE investment of around $35 billion for 1,792 deals.

Favorable demographics, growing GDP and rising foreign direct investments, coupled with forward-looking policy reforms, led to an increase in investments from PE players last year.

According to annual transactions data released by VCCircle.com, a New Delhi-headquartered online financial information group, PE investments in India have risen 12 percent in value terms from $9.5 billion in 2012 to $10.68 billion in 2013.