India In Sight #33
India In Sight #33
Weekly updates on Indian private markets
We are Ambassador Capital Partners, an investment firm with a focus on private credit and private equity. Deeply embedded in the private markets ecosystem, ACP works with large global institutions to provide creative capital solutions for companies and asset managers.
In the spirit of making Indian private markets more accessible and transparent to global LPs and GPs, we have launched ‘India In Sight’ – consolidating and curating relevant information and insights from Indian private markets including trends, key deals, fundraises, KPIs and top tier research.
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KEY DEALS
Equity
Krutrim AI, a domestic AI firm founded by Bhavish Aggarwal (Ola founder), raised c.$50 million led by Matrix Partners at a valuation of c.$1 billion, making it India’s first unicorn in 2024. Krutrim had previously raised c.$25 million in debt from Matrix Partners in October 2023. (January 27, 2024)
[Expected] Oyo Hotel, a domestic hotel-booking company, is looking to raise c.$400 million from Khazanah, Malaysia’s sovereign wealth fund, as a part of its fundraising plans for expansion and debt reduction before the IPO. (January 25, 2024)
[Exit] Softbank sold its c.2% stake in Paytm (One97 Communications), an online payments platform, via a series of open market transactions. Softbank had first invested in Paytm in 2017 and has harvested c.$710 million since then with the remaining stake valued at c.$300 million (vs. total investment of $1.6 billion over the years). (January 24, 2024)
Vivifi Finance, a non-banking finance company, raised c.$75 million in its Series B round of funding in equity and debt from a US-based investor. The name of the investor and other details were not disclosed. (January 24, 2024)
SK Finance, a non-banking financial company, raised c.$160 million from existing and new investors. Existing investors include Norwest Venture Partners, TPG Growth and Baring PE India. New investors include Motilal Oswal Alternatives, Axis Alternatives, Ananta Capital, Mirae Asset, Duro Capital. (January 23, 2024)
Credit Deals and Issuances
SBI Card raised c.$65 million via issuance of NCDs at c.8% coupon. (January 24, 2024)
Cholamandalam Investment raising c.$210 million via issuance of NCDs at c.9% coupon. (January 22, 2024)
MARKET INSIGHTS & RESEARCH
Articles
Consumer credit in India is growing rapidly, with nearly $100 million credit cards in circulation (2x vs five years ago), however this expansion primarily benefits the 40 million affluent Indians. Only c.13% of Indians borrow from formal sources, vs 40% in China. Credit landscape can be further improved with digital lending coupled with UPI that can spread access to a wider group of borrowers and draws in more lenders. Read more.
India's bond market could see c.$100 billion in inflows over the next 3-5 years as operational enhancements are attracting major institutional investors in the fast-growing economy. Factors driving interest include a large and liquid market, favorable risk-reward profile, diversification benefits, high yields, forex reserves stability, JP-GBIEM index inclusion, and expected increase in FPI. Read more.
Development of the electric vehicles sector with better tax incentives, production-linked incentives, and improved charging infrastructure is expected to be one of the drivers of India’s development. Total EV sales in India stood at c.1 million units in 2022 with the target to reach c.10 million in annual unit sales by 2030. PLI outlay for Advanced Chemistry Cell (ACC) battery storage is c.$2.2 billion and c.$3.2 billion for auto, auto-components and drone industries. Read more.
Social Stock Exchange (SSE) is a new approach to impact investing, designed to help non-profit organizations and for-profit social enterprises to raise funds from private investors with the intent to generate social impact alongside financial returns. India faces a significant annual funding gap of $560 billion to achieve UN Sustainable Development Goals by 2030, making SSE crucial in involving the private sector and HNIs to fill this void. Read more.
Reports
As per Grant Thornton’s Dealtracker for 2023, deal value in India fell by over 50% in 2023 to $66 billion with c.1,640 deals (down by c.20% vs 2022). Total PE deal value stood at c.$27 billion with c.1,050 deals. Factors such as international liquidity challenges, market volatility, and cautious investor sentiment contributed to this decline, particularly affecting M&A deal values, which dropped by 72% to c.$25 billion across c.500 transactions. Read more.
‘Private Market Investing Outlook’ report by LetsVenture offers a comprehensive analysis of the Indian startup ecosystem and fundraising trends and explores novel perspectives from investors, particularly regarding the impact of supporting startups with solid revenue and profit metrics.
As per EY report on electronics manufacturing services (EMS), India's EMS sector is set to grow strongly, with domestic production expected to grow at a 24% CAGR from FY22 to FY27, supported by government incentives. This growth is driven by advancements in technology, increased affordability, and a focus on sustainability, especially in sectors like electric vehicles.
‘Industrial Snapshot Q4 2023’ by Colliers provides an overview of the resilient industrial and warehousing sector with a 2% growth in gross leasing at 25 million sq ft, driven largely by Pune and Mumbai. There was a 26% surge with the 3PL sector maintaining a strong 40% share. The FMCG sector's leasing activity grew over 2.5x vs 2022, and the year ended with a record high quarterly leasing and a significant supply increase to 23 million sq ft.
KPMG’s report- ‘Building blueprints of tomorrow’ emphasizes the critical need for sustainable urban development in response to the global population exceeding 8 billion. It advocates for the adoption of advanced technologies and green energy solutions in the construction industry to promote sustainability and efficiency. Highlighting the significance of both government and private sector roles, the report is a comprehensive guide to the latest trends in sustainable construction globally.
Sector views: Some quick takeaways and insights on Indian hotel industry; structured finance; and commercial real estate (Office REITs).
KPIs
India saw a surge in business activity in January, recording the fastest growth in four months. The PMI jumped to 61.0, marking the highest level since September. Both manufacturing and services sectors contributed to this growth, with their PMIs climbing to 56.9 and 61.2, respectively.
The taxpayer base in India has significantly expanded from c.53 million in FY14 to c.94 million in FY23. TDS became the most substantial part of direct taxes, with collections nearly doubling to c.$102 billion in FY23 from FY18. Over the past decade, net direct tax collections soared by c.160%, reaching c.$208 billion in FY23, up from c.$80 billion in FY14.
India's direct tax-to-GDP ratio in 2022-23 reached a 15-year high at 6.1%, nearing the 2007-08 peak of 6.3%, with direct taxes now comprising over half of total tax revenue at c.55%.
The Indian government is aiming to scale down its gross borrowing to c.$191 billion in FY25, with a fiscal deficit goal of 5.5% of GDP. SBI analysts project net market borrowing to reach c.$146 billion.
ICYMI
The Finance Minister announced active collaboration between the government and the RBI to enhance the central bank digital currency for cross-border payments, with a pilot already launched involving nine major banks.
The Karnataka government secured eight MOUs totaling c.$2.8 billion from international firms at World Economic Forum (Davos), including significant investments from Web Werks and Microsoft for data centers and digital training, aimed at boosting the state's economic and employment growth.
Interim Budget Expectations 2024 (1st Feb, 2024)
Indian Venture and Alternate Capital Association (IVCA) is advocating for tax parity between listed and unlisted securities for domestic investors, aiming to equalize long-term capital gains taxes. IVCA also anticipates clarity on rules for tax collection at the source in the interim budget. Read more.
Key areas of focus in the interim budget include job creation to address unemployment among India's youth, fiscal prudence with a potential fiscal deficit target of 5.3% of GDP, sustained capital expenditure particularly in infrastructure to fuel economic growth, bolstering private consumption, and increased funding for social sector schemes due to higher tax revenues. Read more.
Key budget expectations for the EV sector include reducing GST on batteries to 5% from 18% and seeking clarity on FAME-III incentives for charging and battery swapping infrastructure. Read more.
India's hospitality industry is projected to grow from $25 billion to $31 billion by 2029. Global initiatives, along with the promotion of domestic tourism and destination weddings, are expected to further boost the sector. Stakeholders are anticipating supportive policies in the upcoming interim budget for sustained growth. Read more.
India's edtech sector, currently facing challenges like layoffs and funding issues, looks forward to potential relief in the 2024 Interim Budget. The sector expects measures like tax exemptions, reduced GST rates, and enhanced digital infrastructure to stimulate growth, building on the previous year's budget increase in education funding. Read more.
WEEKLY MARKET UPDATE (w/c January 22, 2024)
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