India In Sight #58 (Special Edition: Budget 2024)
Weekly updates on Indian private markets. Special Edition with Union Budget 2024 highlights.
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Do not miss the special section with key highlights from Union Budget 2024-24!
Key reports in this edition:
Wealth with purpose- A report on private Indian philanthropy by BCG x AIP
India RE market monitor Q2 2024 - Investments by CBRE
The new frontier in real estate investment (SM REITs) by KPMG
IPOs in India - Performance and Capital Market Highlights FY24 by KPMG
Envisioning future of circular economy in India by Grant Thornton
Budget 2024: Strategic roadmap for Indian real estate to reach $1Tn by 2030 by Colliers
KEY DEALS
Equity
Lenskart, an eyewear retail chain and platform, raised c.$20 million from its existing founders and investors. (July 18, 2024)
Urban Company, an online marketplace for home services, raised c.$63 million in a secondary round led by Dharana Capital, a domestic venture capital firm, which invested c.$50 million in the company. (July 17, 2024)
ValueQuest, a portfolio management company, invested c.$36 million in Jupiter International, a photovoltaic solar cell producer, to expand its manufacturing capacity. (July 16, 2024)
Auxilo Finserve, an education-focused non-bank lender, raised c.$33 million in a funding round led by LeapFrog Investments with $30 million investment. Other investors include Trifecta and Xponentia. (July 16, 2024)
BluSmart Mobility, an Indian ride-sharing company, raised c.$24 million from its existing investors ResponsAbility Investments, MS Dhoni’s Family Office, and ReNew Energy founder for expanding operations and building EV charging infrastructure and assets. (July 15, 2024)
Credit Deals and Issuances
Bank of India raised c.$600 million through the issuance of infrastructure bonds at a coupon rate of 7.5%. (July 19, 2024)
BlackSoil NBFC, a flagship non-bank lending arm of BlackSoil Group, raised c.$25 million in debt from HNIs, UHNIs, family offices, banks, and NBFCs. (July 19, 2024)
SAEL, a renewable energy company, is looking to raise c.$500 million through senior secured dollar green bonds from Barclays, HSBC, Standard Chartered Bank, and UBS. (July 18, 2024)
Zee Entertainment Enterprises to raise c.$240 million from Resonance Opportunities Fund, St. John's Wood Fund Limited, and Ebisu Global Opportunities Fund by issuing foreign currency convertible bonds (FCCBs) on a private placement basis. (July 17, 2024)
Canara Bank raised c.$1.2 billion through the issuance of infrastructure bonds at a coupon rate of 7.4%. (July 16, 2024)
KEY FUNDS AND FUNDRAISES
L Catterton, a consumer-focused private equity arm of LVMH, is looking to launch its maiden India investment vehicle with a target corpus of c.$480 million. (July 20, 2024)
Raghav Bahl (ex-Alibaba Group India) and Soham Avlani (ex-9Unicorns) launched their own venture capital fund PROMAFT Partners with a target corpus of c.$120 million. (July 18, 2024)
Yali Capital, a deeptech focused venture fund, launched its maiden fund with a target corpus of c.$100 million. (July 16, 2024)
Goldman Sachs is looking to raise c.$2 billion for its maiden Asia-focused private equity fund which will focus on investing in Japan and India. (July 15, 2024)
UNION BUDGET 2024 HIGHLIGHTS
Here are the highlights from The Union Budget 2024-25, emphasizing investment opportunities and relevant statistics:
Budget Estimates
Total receipts (excl. borrowings): c.$385Bn; Total expenditure: c.$580Bn; Net tax receipt: c.$310Bn
Fiscal deficit: 4.9% of GDP, aiming for below 4.5% next year
Inflation target: 4%, with core inflation at 3.1%
Angel Tax and Private Market Reforms
Angel Tax Removal: The budget abolishes the angel tax for all classes of investors, a significant reform to encourage startup investments by removing the tax on share premiums exceeding fair market value for both resident and non-resident investors.
Capital Gains Tax Changes: Long-term capital gains tax on all financial and non-financial assets is set at 12.5%, which may impact HNIs' decisions on alternative investments.
Corporate Tax Reduction: Rate for foreign companies reduced from 40% to 35% to attract more foreign investment
Anusandhan National Research Fund with a $12Bn financing pool for private sector-driven R&D
VC fund with $120Mn corpus to be set up for expanding the space economy by 5x in the next 10 years
Key Sectors and Investment Opportunities (Part 1)
Infrastructure: $130Bn+ for central government infra projects (3.4% of GDP); $18Bn for state infra investments, including rural connectivity and flood migration
Urban development: $120Bn+ in urban housing under PM Awas Yojana Urban 2.0 to address housing needs for 10Mn urban poor and middle-class families
Focus on Defense (c.$55Bn), rural development (c.$32Bn); education (c.$15Bn); IT (c.$14Bn)
Manufacturing: Enhanced credit for MSMEs, Mudra loans increased to $25K
Services: Financial support for MSMEs setting up food irradiation units. Additionally, e-commerce export hubs to be established
Development: $35Bn+ for women development. Multiple initiatives in employment & skilling targeting over 50Mn youth
Agriculture: $18Bn allocated. 100+ new high-yielding and climate-resilient crop varieties, natural farming for 10 million farmers, and digital public infrastructure for agriculture within three years
Energy Transition: $8Bn allocated. 10Mn households will receive up to 300 units of free electricity every month. 12.8Mn registrations and 1.4Mn applications so far
Renewable friendly policies: Policies for energy transition, pumped storage projects, nuclear energy R&D with private sector collaboration
Simplified FDI and Overseas Investments to facilitate FDIs and promote opportunities for using INR as a currency for overseas investments.
Import duty exemption for 25 critical minerals, including lithium, crucial for electric vehicle batteries
Reduction of import duties on gold and silver from 15% to 6%
Where should investors put their money?
The abolition of the angel tax and increasing LTCG could bode well for the private market (alternative assets). Investors can focus on sectors such as affordable housing, roads, infra, renewable energy, critical minerals, electric vehicles, and technology startups. Reduced import duties on gold, silver, and essential minerals reflect new opportunities in precious metals and the EV supply chain. The government's emphasis on digital public infrastructure and skill development also highlights potential in technology and education sectors.
Key Sources:
MARKET INSIGHTS & RESEARCH
Reports
BCG and Accelerate Indian Philanthropy (AIP) report ‘Wealth with purpose- A report on private Indian philanthropy’: Philanthropy in India is transitioning from traditional, faith-based giving to more strategic and impactful approaches, driven by young first-generation wealth creators. The survey across 100 ultra-high-net-worth individuals reveals that UHNIs are increasingly engaging in philanthropy beyond financial contributions, involving time, talent, and networks to magnify their impact. It highlights that collaboration is crucial for amplifying impact while highlighting the six distinct philanthropic archetypes among Indian philanthropists. “If UHNIs channel just 5% of their annual incremental wealth, they could contribute an $9-10Bn annually, which is 5x of the total CSR spent by India Inc in FY2023.”
CBRE report: ‘India market monitor Q2 2024 - Investments’: Equity investments in Indian real estate stood at c.$6.3Bn in 1H 2024, up 40% H-o-H and 117% Y-o-Y. In 2Q 2024, segmental shares of investments stood at 38% for the office sector, which dominated investments; followed by land / development sites (28%) and residential (15%). The office sector is expected to witness sustained demand for quality space, retailers will continue to capitalise on favourable market conditions and prioritise leasing in strategic locations. A healthy mix of primary and secondary leasing is projected to continue at a steady pace. The momentum in investment activity is expected to continue in 2024, primarily due to the resurgence of investment inflows in built-up office assets, and strong acquisition pipelines for development sites in the residential sector.
KPMG’s report ‘The new frontier in real estate investment’ highlights the transformative potential of Small and Medium Real Estate Investment Trusts (SM REITs) in democratizing access to high-value real estate in India through fractional ownership. SEBI's amended regulations allow retail investors to participate in premium properties with a minimum investment of INR 1Mn, enhancing investment flexibility and potential returns of 9-17%. While SM REITs offer significant opportunities, challenges such as liquidity concerns, tax implications, and the need for co-owner consensus require careful management. This initiative is expected to drive growth and innovation in the real estate sector.
KPMG’s report on ‘IPOs in India’ analyzes the performance of IPOs on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in FY2024, covering 76 companies listed in FY24 (with c.$25Bn in foreign institutional inflows), 36 in FY23, and 47 in FY22. It evaluates various parameters such as offering size, subscription data, PE-backed vs. non-PE-backed companies, and sector-wise performance. The Indian startup ecosystem ranks third globally with 107 unicorns collectively valued at c.$350Bn, further strengthening the thesis for investors in the Indian public and private markets.
Grant Thornton’s report: ‘Envisioning future of circular economy in India’ highlights that India's rapid economic growth has led to resource depletion and environmental degradation. Transitioning to a Circular Economy, which promotes the reuse, remanufacturing, and recycling of products, is essential for sustainability and economic resilience. Government initiatives and sector-specific strategies, particularly in water, metals, and textiles, highlight the importance of adopting circular practices to reduce waste, enhance resource security, and drive sustainable development. The textiles industry is expected to grow at 10% CAGR to reach $350 billion by 2030 with $1.4 billion in PLI schemes for textile makers (startups to get $60K in grants). Read more.
Colliers report ‘Budget 2024: Strategic roadmap for Indian real estate to reach USD 1 trillion by 2030’ lays out that the expectations from the Union Budget 2024 which has the potential to be a pivotal moment for India's real estate sector, which has seen robust growth in recent years. Stakeholders are eager for policy measures that could help the sector reach $1Tn by 2030, including infrastructure status, affordable housing standardization, and sustainability initiatives. Expectations include enhanced infrastructure spending, tax reforms, and support for green initiatives, which are anticipated to drive significant growth and investments across various real estate verticals.
Articles
Private equity investments reached c.$3.6Bn in Q2 2024, up by 30%+ yoy, despite a drop in the number of deals from 353 to 299. Global private equity funds have dominated deal-making in India since early 2024, starting with Brookfield's $2.5Bn buyout of ATC's Indian unit and including significant deals by Warburg Pincus and KKR. Industry experts suggest that reforms to build domestic capital linkages could further boost the private equity sector. Read more.
The upcoming union budget is expected to address key demands from the VC and PE ecosystem, including simplifying taxation norms, relaxing startup identification criteria, and unlocking domestic capital. Stakeholders also seek easing borrowing for SMEs and startups, especially for working capital, and reforms to retain talent through tax simplifications and eliminating dual taxation on ESOPs. Additionally, removing the Angel Tax and expanding exempted countries for non-resident investments are crucial. The budget's focus will be on enhancing the ease of doing business and boosting funding in emerging sectors. Read more.
Temasek plans to invest up to $10Bn in India over the next three years, focusing on sectors such as financial services and healthcare. In FY2024, Temasek invested $3Bn in India, marking its largest annual investment in the country. Key investments include stakes in HDFC Bank, Ola Electric, and Manipal Hospitals, with a significant $2Bn stake increase in Manipal to 59%. Temasek's increased investment comes as it takes a cautious approach towards China amid economic and geopolitical tensions. Read more.
India's significant achievements in digital public infrastructure (DPI) include Aadhaar, DigiLocker, and UPI, which processed 12Bn transactions in January 2024. The government aims to achieve a $1Tn digital economy by 2027-28, with rural internet subscriptions increasing by 200% between 2015 and 2021, reflecting efforts to bridge the digital divide between rural and urban areas. Read more.
The increasing market cap of Indian startups like Zomato, Policybazaar, and MamaEarth has paved the way for other startups to go public, creating significant wealth for founders and investors. Zomato's co-founder Deepinder Goyal joined the billionaire club, with the company's market cap surpassing $24Bn. Prominent figures include Nykaa's Falguni Nayar and Sanjeev Bikhchandani, with holdings worth over $3.2Bn each. Despite challenges, founders like Paytm's Vijay Shekhar Sharma and Policybazaar's Alok Bansal have also amassed substantial wealth, highlighting the lucrative potential of India's startup ecosystem. Read more.
Investor optimism is driving fundraising activity among Indian corporates, despite a 40% drop in M&A activity in 2023 vs 2022. A revival is expected in 2024, influenced by economic factors and RBI's interest rate decisions. Over the past 24 months, a 250 bps rate cut and nearly 8% average annual GDP growth have shaped corporate fundraising, valuation trends, and private capital expenditure. Read more.
KPIs
According to the NCAER-NSE quarterly survey, the Business Confidence Index rose to nearly 150 in the April-June 2024 quarter from 138 in the previous quarter. This marks the highest level of optimism since Q3 2010-11, with 67% of firms optimistic about improvements in their financial position. [Paywall]
RBI reported increased economic activity in Q2 2024-25, with a positive outlook for agriculture and a revival in rural spending. Global trade is also gaining momentum. However, consumer price inflation rose in June 2024, interrupting the overall trend of disinflation.
Below is a quick snapshot of the services sector performance from the latest RBI bulletin July 2024.
WEEKLY MARKET UPDATE (w/c July 15, 2024)
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