India In Sight #37
India In Sight #37
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
Zurich Insurance to acquire c.70% stake in Kotak Mahindra General Insurance for c.$670 million via primary and secondary acquisitions in a single tranche paid upfront instead of staggering the purchase (51% upfront, followed by 19% additional stake acquisition over three years) as planned in last year’s earlier proposal. The Competition Commission of India (CCI) approved the acquisition. (February 23, 2024)
[Exit] Lighthouse Funds, a domestic mid-market PE firm, sold c.1% stake in Poly Medicure, a medical device manufacturer, for c.$25 million in a secondary market transaction. The PE firm first acquired c.2% stake in the company for c.$13 million in 2020 and invested across tranches over the years (3x MOIC in 3 years). (February 22, 2024)
[Exit] Gupta Family office, the family office of Havells Group promoters, sold its remaining stake in Campus Activewear, a sports footwear brand, for c.$13 million in an open market transaction. The family office initially invested c.$10 million in the company in 2017 and has harvested c.$50 million till date (translating to 5x MOIC). (February 21, 2024)
[Exit] Verlinvest, a Belgian private equity firm, sold its remaining stake in Sula Vineyards, an Indian winemaker and marketer, for c.$48 million. Verlinvest first invested in Sula in 2010 for c.$20 million and has invested across multiple tranches over the years, and has harvested c.$200 million till date (translating to 5x MOIC overall). (February 19, 2024)
Credit Deals and Issuances
PAG Asia, a global alternative investment manager, to invest c.$50 million in Lavish Buildmart, a subsidiary of M3M India, a real estate developer, via 15% bonds (18%+ yield) for refinance existing debt and land acquisition. (February 23, 2024)
Adani Airports Holdings raised c.$50 million via secured, listed, rated NCDs for three and five years, offering 10%. The bonds are being raised for capex funding, refinance, and for loans to its special purpose vehicles. (February 22, 2024)
Angel One, a domestic broking firm, is looking to raise c.$250 million to invest in fintech space through a preferential issue, further public offer, or QIP. (February 22, 2024)
KEY FUNDS AND FUNDRAISES
Spyre PropTech, a real estate focused venture capital fund, launched a new fund with a target corpus of c.$100 million, to invest in early and growth stage companies. The fund aims to mark the first close at c.$50 million. (February 22, 2024)
Investcorp, a Bahrain-based global alternate asset manager, to launch a new real-estate focused fund with a target corpus of c.$100 million. The fund will invest in logistics and warehouse companies in India. (February 21, 2024)
CVC Capital Partners marked the final close of its sixth Asia-focused fund at c.$6.8 billion. CVC is now one of the leading investors in Asia with secured commitments worth c.$21 billion. (February 21, 2024)
Motilal Oswal Alternates marked the first close of its real-estate focused credit fund at c.$155 million. The fund has a target size of c.$180 million. (February 21, 2024)
Axis Bank’s private equity arm, Axis Private Equity, which had invested in companies such as Bikaji Foods, SBI General Insurance and NSE, completed its full exit from its first fund and has repaid investors with 20%+ IRRs. It has fully deployed the second fund in companies such as Lenskart, Gopal Snacks and SK Finance and could launch its next fund in 2024, with a target corpus of c.$120 million. (February 20, 2024)
NIIF, India’s quasi-sovereign wealth fund, to invest c.$25 million in Amicus Capital Partners’ latest fundraise of c.$200 million. Other key LPs in Amicus Capital’s latest fund include USDFC, HDFC FoF, Self Reliant India Fund etc. (February 19, 2024)
MARKET INSIGHTS & RESEARCH
Articles
According to Bank of America, India is set for a surge in fundraising activities, with a focus on IPOs in 2024 and 2025, predicted to be the busiest in history for such offerings. This optimism is fueled by a robust economy, consistent Sensex gains, and an expanding retail investor base, supported by IMF forecasts of India's economy growing around 6.5% in the next two years, following a 6.7% expansion last year. Read more.
SEBI proposes easing restrictions for index funds and ETFs by removing the 25% investment cap in group companies to better mirror benchmark indices, alongside relaxing the need for dedicated fund managers for commodities and foreign investments, aiming for a more efficient and scalable mutual fund industry. Read more.
As per Elevation Capital, while fintech firms face challenges from regulatory measures, such as increased governance costs and partnership hurdles, these obstacles ultimately lay the groundwork for scalable, long-term growth. This perspective emerges amidst fintech startups navigating recent regulatory actions by the RBI. Read more.
The Indian fintech market is growing and is continuously evolving as it faces certain risks. Three fundamental sources of infirmity need fixing. The KYC process using Aadhaar must be made credible and secure. Since most UPI transactions are free, traditional lenders have little incentive to shorten their technology-upgrade cycle. The monopoly of NPCI, which runs the UPI, needs some dilution as well. The country’s preferred system for moving money online should have a fair charge system with enough competition. Read more.
ORF’s note on Net zero by 2070: Financing India’s biggest infrastructure buildup provides an overview that India's commitment at COP26 to achieve net zero by 2070 necessitates a massive transformation in power, industry, and transport sectors towards low-carbon technologies, marking a significant infrastructure and job creation opportunity. Achieving this goal requires scaling solar and wind capacity 70-fold to 7,700 GW and constructing infrastructure for 114 MMTPs of green hydrogen, with transition costs estimated at c.$10 trillion, revealing a funding shortfall of $3.5 trillion.
Your Story note: ‘India is knocking at the doors of a biofuel gold rush’, outlines that India's push to reduce fossil fuel dependency to 40% by 2030 is driving up biofuel demand among PSUs and private sectors, underpinned by the 'waste-to-energy' mission and the National Policy on Biofuels aiming to boost biofuel production from agricultural waste [Paywall].
Reports
EY report on Private Credit in India: India's economy is poised to grow at ~7% in FY24, driven by domestic consumption, public spending, and service exports, with inflation easing to 5.6% in November 2023, and the country experiencing significant capital inflows and a resilient currency performance against the US dollar. In CY 2023, a total of c.$7.8 billion was invested in private credit deals. Deal flow in CY 2023 was higher than CY 2022 (CY 2023: 108 deals worth c.$7.8 billion vs CY 2022: 77 deals worth c.$5.3 billion). Investments in real estate were c.$1.7 billion in CY 2023 vs c.$1.6 billion in CY 2022 - as it continues to remain one of the largest sectors attracting investments.
As per Stride Venture’s India Debt Report 2024, 190+ startups raised c.$1.2 billion in 2023, marking a 50% increase yoy while total VC investments in startups in 2023 reached c.$8+ billion, declining by 60% yoy. Fintech led investment rounds, captured over 55% of the $1.2 billion investment, followed by consumer sectors at c.25%. For 2024, projections suggest a pivot towards clean tech, especially electric vehicles (22%), consumer (20%), and fintech (16%) as top sectors for venture debt. The overall sentiment is improving with c.60% of founders and VCs and c.80% of LPs showing positive expectations for 2024. Read more.
Jefferies’ research report ‘India’s march onto the global stage’ highlights good governance and major reforms as the key catalyst for India's economic trajectory, predicting it to be the third largest economy by 2027 and aiming for a $10 trillion market cap by 2030. From the eighth to the fifth largest economy, India's GDP has soared to $3.6 trillion, underpinning its rapid growth. Reforms like GST, bankruptcy laws, alongside a vibrant start-up ecosystem and robust digital infrastructure, underscore India's rapid economic growth and appeal to global investors, with the country hosting 111 unicorns and poised for continued growth in services exports. Read more.
As per Nasscom and BCG report on AI Powered Tech Services, India's AI market is expected to reach $17 billion by 2027, with a 25-35% CAGR from 2024 to 2027, driven by increased enterprise tech spending, a growing AI talent pool, and rising AI investments. India has over 420K AI professionals, leading in AI skills penetration, amidst a landscape where IT companies are investing heavily in AI, including a multi-billion dollar commitments from IT majors like Wipro. Read more.
Colliers report on Global Capability Centers in India outlines that in Q4 2023, India's office market hit a record with a 92% yoy increase in leasing activity at 20 million sq ft, while the industrial and warehousing sector also saw its highest quarterly leasing in two years at c.8 million sq ft, up 20% yoy. Despite a 35%+ yoy drop in real estate investment to c.$1 billion in Q4, the overall year witnessed a 10% increase, reflecting positive investor sentiment. The tech sector dominated Global Capability Center (GCC) demand highlighting a strong resurgence in GCC leasing activity in H2 2023. [Paywall]
KPIs
India's 247 million entrepreneurial households, generating a transaction value of $8.8 trillion in FY23, are critical for the nation's economic growth. This segment, measured by the ‘core transaction value’ (CTV) metric, is expected to see a c.13% annual increase, indicating significant yet undercapitalized market potential and promising returns on capital for brands engaging with these households.
RBI's latest bulletin reports that India's economic growth is maintaining its pace from the first half of the fiscal year, highlighting a strengthening investment cycle. This growth is supported by robust government spending, increased capacity utilization, a surge in commercial sector financing, and policy incentives such as the production-linked incentive (PLI) scheme.
Strong tax revenue growth has fueled increased capital expenditure and funding for infrastructure projects, with a 17% rise in gross direct tax collections and expectations for further growth. Enhancements in the tax assessment process include reduced processing times, the introduction of faceless assessments for greater transparency, and the implementation of technology to improve tax collection efficiency.
Below is a quick snapshot of the services sector performance from the latest RBI bulletin February 2024.
WEEKLY MARKET UPDATE (w/c February 19, 2024)
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