How and Where AIF Capital Is Being Deployed

As of March 31, 2025, ₹5.38 lakh crore has been deployed by registered AIFs on a net basis. This capital has been allocated across listed and unlisted instruments, spanning a range of sectors and structures. The data provides a useful picture of how capital raised under the AIF framework is being used in practice.

Real estate is the largest individual sector by cumulative investment, with ₹69,896 crore deployed. This includes a mix of residential, commercial, and hybrid developments. Real estate continues to be one of the few sectors where AIFs play a systemic role in bridging funding gaps, particularly after regulatory shifts that have affected other capital providers.

IT and financial services, including NBFCs and banks, account for over ₹1 lakh crore in combined deployment. These sectors are typically targeted through mid- to late-stage equity transactions, structured credit, or platform-level funding. Allocation to these areas suggests that capital is flowing toward businesses with consistent cash flows, regulatory visibility, and scaling potential.

IT/ITeS continues to be favored for its margin profile, while financial services remain attractive given India’s under-penetrated credit market and the evolution of digital lending and fintech platforms. Many AIFs are backing platforms that blend lending infrastructure with embedded tech, creating hybrid models across payments, collections, and risk scoring. Meanwhile, NBFCs are seeing renewed interest from AIFs for credit enhancement structures and asset-backed lending strategies.

Healthcare and pharmaceuticals have attracted a total of ₹33,794 crore in investment, split between delivery platforms and product innovation. While smaller in size than real estate or financials, these sectors are often included in diversified fund portfolios due to their structural relevance and relative insulation from economic cycles.

The pandemic catalyzed a new wave of investor interest in healthcare infrastructure, diagnostics, and specialty pharma. AIFs are now backing roll-up strategies across diagnostics labs, hospital chains, and medtech services, enabling mid-sized operators to scale nationally. On the pharma side, capital has flowed into formulation-focused companies, CDMOs, and IP-backed ventures that aim to build global relevance from an India base.

₹3.26 lakh crore has been invested in unlisted securities, with the remaining ₹1.52 lakh crore allocated to listed instruments. The unlisted investments include unlisted equity, structured debt, LLP interests, security receipts, and other hybrid instruments. This confirms that AIFs are being used to access exposures not readily available through traditional public market structures.

This unlisted bias also reflects how AIFs are functioning as vehicles for capital formation. Whether it’s a growth-stage startup, a warehouse asset awaiting REIT conversion, or a structured credit facility for a mid-market borrower, the AIF regime enables bespoke structuring that balances investor protections with operational flexibility.

Listed investments are largely concentrated in Category III AIFs and typically involve public market-linked strategies such as long-short, arbitrage, or event-driven approaches. These strategies offer more liquidity and are suited for investors seeking actively managed or relative-value exposure.

Within listed strategies, many fund managers are now incorporating ESG overlays, volatility targeting, and risk-managed equity as value-added features. Category III funds are also experimenting with hybrid approaches that combine directional public equity exposure with opportunistic private placements or PIPE deals, further blurring the lines between public and private deployment.

Overall, the deployment data indicates that fund managers are combining sector focus with flexible capital structures. Fund design is evolving to accommodate mixed mandates blending equity and debt, or listed and private instruments. As the AIF space grows, portfolio construction is becoming more complex, and the ability to underwrite across stages and instruments is becoming more central to fund performance and investor expectations.

This evolution also brings rising expectations from investors. LPs, especially domestic institutions and family offices. They are asking tougher questions around asset-level visibility, capital recycling, and risk buffers. As funds become more multi-asset and multi-strategy, manager discipline, internal decision frameworks, and portfolio rebalancing processes will become key differentiators.

Another emerging trend is the increasing demand for co-investment rights. With LPs looking to get closer to individual deals, GPs are under pressure to offer transparency not just at the fund level, but at the transaction level. This will likely lead to more modular fund structures and sidecar vehicles designed to match investor appetite with opportunity type.

The bottom line? AIFs are no longer just pass-through capital pools. They are becoming architected capital platforms, designed to deploy flexibly, recycle intelligently, and deliver performance across varying market conditions.

As India’s economic landscape continues to evolve, so too will the way AIFs allocate capital. From urban logistics parks to climate infrastructure, from mid-market debt to precision healthcare, the next wave of capital deployment will hinge on how well fund managers can marry financial creativity with thematic foresight.

For insights into capital flows within India’s alternative ecosystem, explore Why India’s Ultra-HNIs Are Doubling Down on Alts, Alternatives & Traditional Investments, and The Strategic Blueprint Behind Value Creation in VC & PE.

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