India In Sight #50
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 reports in this edition:
India’s green hydrogen revolution by EY
Wealth conversations (May 2024) by FundsIndia
Private wealth annual outlook FY2024-25 by JM Financial
India solar market update by Mercom
KEY DEALS
Equity
Google to invest c.$350 million in Flipkart, an e-commerce and retail platform, in its latest $1 billion funding round, led by Walmart. Walmart, which owns Flipkart, is expected to have invested c.$600 million in the fundraise so far. (May 25, 2024)
KKR acquired a significant minority stake in Infinx Services, a healthcare revenue cycle solutions provider, for an estimated c.$150-200 million. Existing investor - Norwest Venture Partners also increased their stake in the company. The exact financial details were not disclosed. (May 21, 2024)
Arpwood Partners, a domestic buyout-focused private equity firm, acquired a majority stake in Sitara, a housing finance company focused on low income groups, for c.$80 million. (May 20, 2024)
[Expected] KKR is looking to acquire a controlling stake in Vibrant Energy, a renewable energy platform, from Macquarie, an Australia-based asset manager, which is looking to sell the platform for an enterprise value of c.$500 million. (May 22, 2024)
[Expected] General Atlantic to sell its stake in Rubicon Research, a pharmaceutical products developer, in its expected upcoming IPO with an estimated $120-140 million issue size. General Atlantic acquired c.58% stake in the company in 2019 for c.$100 million (primary capital). (May 22, 2024)
Credit Deals and Issuances
Navi Finserv, a lending startup platform, raised c.$20 million through NCDs in a private placement at c.11% coupon rate. (May 23, 2024)
KEY FUNDS AND FUNDRAISES
Ivy Growth Associates, a micro venture capital firm, launched Arigato Capital, a venture capital AIF with a target corpus of c.$30 million. The fund will invest in emerging sectors including agritech, cleantech, Gen AI, consumer brands, and SaaS. (May 21, 2024)
PAG, an Asia-Pacific focused investment firm, raised c.$550 million for its maiden renewable energy fund. The fund will focus on investments in physical assets in Asia and solar power in Japan. (May 20, 2024)
True North, a domestic private investment firm, marked the final close for its maiden private credit fund at c.$160 million. (May 20, 2024)
MARKET INSIGHTS & RESEARCH
Reports
EY report: ‘India’s green hydrogen revolution’ provides insights that India's commitment to net zero by 2070 involves a targeted Green Hydrogen ecosystem, crucial for energy transition and reducing emissions in hard-to-abate sectors. The National Green Hydrogen Mission aims to produce 5 MMTPA of Green Hydrogen by 2030, leveraging India's renewable energy potential. This initiative is expected to reduce the reliance on import of fossil fuels and curtailing the cumulative imports of fossil fuels worth c.$12 billion by 2030. The initiative includes supportive policies, financing strategies, and pilot projects across various sectors.
FundsIndia report on ‘Wealth conversations’ provides intriguing investment insights along with returns and performance data focused on long-term strategies in equity, debt, gold, real estate, asset allocation, and diversification.
JM Financial’s ‘Private wealth annual outlook FY2024-25’ provides data and insights across asset classes in India and highlights that in FY2023-24, Indian markets outperformed, achieving around 30% gains, driven by sound fundamentals, strong domestic flows, and a resilient economy. The Nifty MidCap 100 Index rose by 66%, outperforming the broader Nifty Index, which increased by 25%. Key drivers included robust bank and corporate balance sheets, prudent fiscal management, and increased liquidity from the financialization of savings. Sectoral rotation favored realty, industrials, and autos, while consumer stocks underperformed. India's strategic importance for global investors is bolstered by policy stability, robust macroeconomics, and high governance standards.
Mercom’s summary report: ‘India solar market update’ provides insights and stats for the Indian solar sector. India’s cumulative installed solar capacity stood at 82 GW as of March 2024. India's large-scale solar project pipeline stood at 143 GW, with another 93 GW of projects tendered and pending auction as of March 2024. In Q1 2024, India added more than 10 GW of solar, up by 4x yoy. Rajasthan had the highest cumulative installed large-scale solar capacity, accounting for 29%. [Paywall]
Jefferies’ report ‘China and India (Greed or Fear)’ highlights that in India, emerging market foreign investors have sold $4.7 billion worth of equities this quarter and $3.3 billion year-to-date, while domestic mutual fund inflows remain robust. Inflows into domestic equity mutual funds have soared over the past few years. This surge in inflows has led to mid-caps outperforming blue chips, with the Nifty MidCap 100 Index rising by 66% since early 2023, compared to a 25% increase in the Nifty Index. The MidCap index now trades at 29.3x one-year forward earnings, compared to 19.6x for the Nifty Index. For China, property easing has intensified with a scheme for local governments to buy unsold properties and convert them into affordable housing, alongside reduced down payment ratios and scrapped minimum mortgage rates.
Articles
‘Investing in India’s ambition’ note by UBS highlights that India is emerging as a geopolitical and economic superpower, offering attractive investment opportunities in its rapidly growing market. Key drivers include an expanding middle class, stable government, improving export competitiveness, and global relocation of manufacturing. Despite its potential, India poses risks for foreign investors, necessitating selectivity and on-the-ground research. Current government, aiming for a third term, seeks to elevate India to the third-largest economy and a developed nation by 2047. With strong economic growth and a booming middle class, India presents a compelling long-term investment case. Read more.
SEBI has proposed relaxing the valuation norms for alternative investment funds (AIFs) in India. These changes include adjustments in the valuation of certain securities, criteria for independent valuers, and the reporting timeline for AIF portfolios. SEBI suggests that unlisted and non-traded securities should be valued according to International Private Equity and Venture Capital valuation guidelines, while other securities should follow mutual fund regulations. Read more.
India's economic growth, driven by digital adoption, has spiked data consumption, highlighting the need for advanced data centers. The data center market is projected to grow from $4.3 billion in 2021 to over $10 billion by 2027 at c.15% CAGR. With an anticipated 30% annual growth, the total data centre stock in India is projected to reach c.1,370 MW by the end of 2024, up from ~1,030 MW in 2023. This significant supply addition (~330 MW) presents exciting opportunities for data centre operators and investors. Key factors include AI, cloud adoption, and supportive government policies. Read more.
Investors are increasingly focusing on India's fintech and financial services (BFSI) sector due to its significant contribution to the GDP and market potential. India could reach 75 unicorns in the fintech and BFSI space in the next three years and 150 by the end of 2030. Key categories within BFSI that could offer compelling opportunities: BFSI SaaS, financial services (primarily lending), and tech (non-lending businesses), investing in sub-segments like healthcare, education, and real estate. Regulated businesses and collaboration with financial institutions are required to enhance digital financial services, aiming to build sustainable businesses and market leaders in the financial ecosystem. Read more.
Foreign investors have resumed purchasing fully accessible Indian government securities this month, influenced by easing US inflation and India's upcoming inclusion in global bond indices. From May 8 to 22, FPI holdings in these bonds increased by $4 billion to $20 billion, reversing a six-week selling trend. India's inclusion in JPMorgan’s emerging market bond index has yet to be fully priced into the market. Despite $8.2 billion in foreign investments since the announcement, benchmark 10-year bond yields have only decreased slightly. Future pricing adjustments are expected once US interest rates decline. Read more.
India's dynamic economic landscape and market performance are attracting significant interest from institutional investors globally. This growing foreign investor interest is driven by India's robust market opportunities and economic growth. Few drivers include: Broad-based growth attracting interest, dynamic wealth creation, liquidity inflection point, and future growth potential. Read more. [Paywall]
KPIs
In FY23, the total compensation of employees in private corporations increased to 13.5% of GDP from 12.8% in FY22. Meanwhile, wages for households, primarily in the informal sector, rose to 8.5% of GDP, the highest level in nine years, up from 8.4% in FY22. [Paywall]
Private sector investment in India is expected to rise in the second half of FY25, especially in the hotel and tourism sectors, following years of government-led infrastructure spending. Although the government's capital expenditure has significantly increased, its growth rate has slowed down in 2024-25 to 11% (vs 35% in previous three financial years).
The Indian equity derivatives reached $6 trillion in notional volume in February (up by 6x from 2022), majorly driven by growing retail participation, has raised concerns among policymakers about the potential impact on household savings. Despite warnings from regulators, retail activity continues to increase, posing future challenges for markets and household finances.
WEEKLY MARKET UPDATE (w/c May 20, 2024)
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