India In Sight #52
India In Sight #52
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:
The rise of India’s semiconductor startups report 2024 by Inc42
Asia Pacific global capital flows H2 2024 by Colliers
India fixed income – Elections, inclusion and allocation by HSBC
Private placement of securities by KPMG
KEY DEALS
Equity
Hero MotoCorp (c.2.5% stake for c.$16 million) and Zerodha’s co-founder Nikhil Kamath (c.5% stake for c.$34 million) acquired Flipkart founder Sachin Bansal’s remaining 7.5% stake in Ather Energy, an electric scooter maker, for a combined deal value of c.$50 million. (June 7, 2024)
[Exit] Quadria Capital, a healthcare-focused PE firm sold its 10% stake in Akums Drugs and Pharmaceuticals, a pharmaceutical manufacturer, back to the promoters however exact financial details were not disclosed. The company is looking to raise c.$82 million via fresh issue in its planned IPO. Quadria had initially invested c.$70 million in the company in 2019. (June 5, 2024)
Fibe, a lendingtech platform, raised c.$90 million in its Series E funding round from TR Capital, Amara Partners, and Trifecta Capital. (June 5, 2024)
Temasek and Fidelity invested c.$200 million in Lenskart, an eyewear retail chain and platform, in a secondary share transaction at a valuation of c.$5 billion. (June 3, 2024)
[Expected] Noble Hygiene, a disposable hygiene products manufacturer, is looking to raise c.$70 million through an expected controlling stake sale to private equity investors. (June 6, 2024)
Credit
Satin Creditcare, a microfinance company, raised c.$40 million through NCDs from FMO, a Dutch development bank. (June 5, 2024)
KEY FUNDS AND FUNDRAISES
Alteria Capital, a domestic venture capital debt firm, secured a commitment of c.$12 million from IFC for its third venture debt fund with a target corpus of c.$100 million. (June 7, 2024)
KKR, Global Infrastructure Partners, and the Indo-Pacific Partnership for Prosperity have formed a coalition to invest c.$25 billion in infrastructure in Indo-pacific region, including investments in green data centers in Indonesia, renewable energy in the Philippines, and smart meters and hybrid renewables in India. Other global investors including BlackRock, GIC, Rockefeller Foundation, and Temasek will also be part of the coalition. (June 6, 2024)
Auxano Capital, a growth-stage VC firm, is looking to raise c.$50 million (target raised from $25 million earlier) for its category II early-stage VC fund and also aims to launch GIFT City fund with a target corpus of c.$50 million in 2025. (June 6, 2024)
MARKET INSIGHTS & RESEARCH
Reports
Inc42’s ‘The rise of India’s semiconductor startups report 2024’ outlines that India is poised for a $150 billion+ total market opportunity for semiconductors by 2030, with $21 billion+ specifically in AI semiconductors. The central government will cover 50% of the semiconductor manufacturing setup costs. There are over 100 semiconductor startups in India. Since 2014, there has been a 2.4x yoy growth in Indian semiconductor startup launches. Additionally, 20% of the global semiconductor integrated circuit (IC) design workforce is from India. [Paywall]
As per Colliers' latest Asia Pacific global capital flows H2 2024 report, India ranked among the top five global destinations for cross-border capital in land and development site investments in the March quarter, with foreign investors contributing about 55% of the inflows. Notably, 73% of new foreign investments focused on ready assets. Read more. [Paywall]
HSBC’s report on India fixed income – Elections, inclusion and allocation states that despite potential volatility, India's bond market is underpinned by a robust macroeconomic framework and ongoing reforms. The upcoming inclusion of Indian government bonds in JPMorgan’s index is anticipated to attract significant investment inflows, enhancing demand and potentially lowering bond yields. “During 2010-2016, India 10-year government bond yields traded above 8-9%, the recent 7-year period since 2017 has seen yields hardly move even above 8%, in contrast US 10-year government bonds moved from 0.5% to 5% in the same period. Hence, the spread between India and US 10-year government bond yields has drifted down to about 265bps now.” 2024 India elections - market impact gives a quick overall summary of the Indian markets.
KPMG report on ‘Private placement of securities’ outlines that companies raise funds through debt or equity, choosing methods like private placements or public offerings based on their stage of growth. The private placement, selling securities to selected investors rather than the public, is popular among startups for its flexibility and less stringent regulatory requirements, though it still demands adherence to good corporate governance. Recent cases highlight the need for compliance with laws to avoid penalties.
Amundi’s note on India's election outcome and its economic implications states that despite initial market volatility, Indian equity indices have rebounded and now show significant gains. The economic outlook remains strong with robust domestic demand and fiscal consolidation. India's equity markets are viewed positively due to solid earnings, macro stability, and favorable long-term structural tailwinds. At a sector level, industrials, capital goods, construction and other manufacturing-oriented sectors along with PSUs that were well placed to benefit from the government’s thrust of capital spends ae expected to do well.
Robeco’s insights on domestic flows underpinning India’s equity valuations notes that despite high valuations, India’s equity markets are supported by a surge in domestic equity inflows from households and retail investors. This shift has led to the MSCI India outperforming global indices since 2020. The trend is driven by a young, digitally savvy middle class, and robust investor education, with average annual domestic flows increasing significantly post-Covid. The durability of this trend is underscored by low mutual fund penetration in household savings, steady SIP contributions, and strong equity market returns compared to bank deposits.
KPMG report: ‘Talent feasibility study in India’ examines the talent landscape across major and satellite cities, focusing on factors like talent pool availability, quality of living, cost of living, ease of business, compensation, and attrition. The study, involving over 40 organizations across 10+ sectors, highlights that while metro cities remain dominant, satellite cities like Navi Mumbai and Pune are emerging as attractive options for employers and employees due to diverse skilled talent and favorable living conditions.
KPMG’s report: ‘Decoding India's economic growth’ highlights the nation's economic health, growth drivers, and future opportunities. India is projected to become a $7 trillion economy by 2030, driven by increasing exports and global collaborations. Key sectors like agriculture, automobile, technology, financial services, and pharmaceuticals show significant growth potential. Government initiatives such as Gati Shakti, PLI, and Digital India are fostering a business-friendly environment, with the GDP expected to grow at 7.0% in FY25.
Articles
Inc42’s note outlines that 2024 is expected to see a surge in the IPO market, with as many as 100 companies anticipated to list on the stock exchange. While market experts believe that strong fundamentals will play a crucial role in making the public offers of startups attractive to investors, elements like a first-mover advantage in a particular industry and other USPs should not be underestimated. The country is expected to see some of the most noteworthy new-age tech IPOs this year like Swiggy, Ola Electric, FirstCry, ixigo, Unicommerce, Ola Cabs, PayU, and MobiKwik. Read more.
A clear vision for the Indian startup industry for the next five years is crucial. The new government should address concerns like regulatory fear, climate action, and fostering domestic tech capabilities in AI and semiconductors. Past initiatives were successful, but a new approach is needed for today's tech landscape. By prioritizing critical areas and bridging the R&D-commercialization gap, India's startups can thrive in the coming decade. Read more.
The digital economy and emerging technologies like AI are crucial for India's future growth. Many overseas-headquartered Indian startups, including Groww, Flipkart, Zepto, and Razorpay, are considering shifting their base to India to list on Indian stock exchanges. India's strong economic growth has led to a trend of reverse flipping in startups. However, challenges like high taxes and regulatory hurdles complicate the process. Read more.
RBI Governor emphasized the central bank's commitment to managing money market rates and borrowing costs through flexible liquidity management. The RBI will use various operations to address liquidity, especially with anticipated foreign investment inflows. RBI is prepared to handle liquidity impacts and respond swiftly to market conditions. Read more.
KPIs
Narendra Modi is set to begin his third term as Prime Minister of India. India's economic growth is strong, inflation is down, and optimism about its manufacturing future is high. The RBI has kept key interest rates unchanged to balance growth and inflation, while the economy shows resilience with significant growth in manufacturing, services, and key economic indicators.
Agricultural GVA growth slowed to 1.4% in FY24. However, the government expects improvement due to better monsoons, increased consumption, credit growth, and private capital formation, which should drive employment and investment. Despite concerns, there is no systemic risk, and economic indicators suggest resilience and potential for recovery. Read more.
The Household Consumption Expenditure Survey (HCES) results show a decline in consumption inequality in India over the last decade. The share of the top 10% of households in consumption decreased by 1.9% in rural areas and 4% in urban areas, and the Gini coefficient also showed a decline, indicating improved income distribution between 2011-12 and 2022-23. [Paywall]
In 2022-23, rural India spent 6.2% of its expenditure on non-food items, compared to 9.5% in urban India. Despite this, rural areas outspent urban areas on clothing, footwear, durables, fuel, power, medical care, and entertainment, reflecting varied spending priorities.
WEEKLY MARKET UPDATE (w/c June 3, 2024)
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