India In Sight #61
Weekly updates on Indian private markets.
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Key reports in this edition:
The Coming of Age of D2C Report 2024 by Sorin Investments
AMMO India 2024 by KPMG
Striking gold: The rise of India’s gold loan market by PWC
The India GCC revolution - Where real estate and talent converge by CBRE
VIKSIT: An approach for India to achieve $1 trillion exports by PWC
KEY DEALS
Equity
Fortis Healthcare, a private hospital network, to acquire a c.$34% stake in Agilus Diagnostics, a diagnostics company, from its PE investors Jacob Ballas and IFC at an estimated valuation of c.$600 million. (August 08, 2024)
Visit Health, a telehealth and wellness platform, raised c.$30 million from Docprime Technologies and existing promoters, in a primary and secondary stake sale. (August 07, 2024)
BrainBees Solutions, the parent company of FirstCry, raised c.$227 million from anchor investors ahead of its IPO. SBI, Fidelity, Goldman Sachs, ICICI, HDFC, Kotak, Bajaj Allianz, Steadview, Morgan Stanley, and Max Life are some key anchor investors in Firstcry’s IPO. (August 06, 2024)
Fourth Partner Energy, a solar energy company, raised c.$275 million from IFC, Asian Development Bank and DEG (German development finance institution). IFC invested c.$125 million, ADB invested c.$100 million, and DEG invested c.$50 million in the funding round for business expansion plans, including a target portfolio of 3.5 GW renewable energy assets by 2026. (August 06, 2024)
Apax Partners, a global investment firm, invested in greytHR, a human resource management system, through its Apax Digital Fund II. The exact details of the transaction were not disclosed. (August 05, 2024)
Credit Deals and Issuances
National Bank for Financing Infrastructure and Development (NaBFID) to raise c.$120 million through the issuance of the 20-year bonds, the first of its kind from a DFI. (August 10, 2024)
Tata Capital is looking to raise c.$200 million through the issuance of NCDs on a private placement basis. (August 09, 2024)
Canara Bank is looking to raise c.$300 million by issuing overseas bonds to bolster its liability franchise amid strong credit growth. (August 08, 2024)
Country Delight, an online milk and grocery delivery platform, has secured c.$8 million in debt funding from Alteria Capital. (August 05, 2024)
Sharechat, a social media unicorn, raised c.$16 million in convertible debt in an extended round led by a Singapore fund. The funds are raised as an extension of its c.$49 million convertible debt fundraise from Tencent and existing investors like Lightspeed. (August 03, 2024)
KEY FUNDS AND FUNDRAISES
India Inflection Opportunity Fund, managed by Pantomath Capital Management, marked the first close of Bharat Value Fund, its new investment vehicle, at c.$120 million. The fund has a target corpus of c.$240 million and aims to invest in pre-IPO opportunities in growth stage and mid-market corporates. (August 05, 2024)
HDFC AMC, the asset management arm of HDFC Group, marked the first close of its maiden PE/VC Fund of Funds (FoF). The fund has a target corpus of c.$180 million (with c.$180 million greenshoe) and aims to invest in Indian PE and VC funds. (August 05, 2024)
Sauce.VC, a domestic early stage venture capital firm, marked the final close of its third fund at c.$43 million vs its initial target of c.$30 million. (August 05, 2024)
ResponsAbility Investments, a Switzerland-based impact asset manager, marked the second close of its Asia-focused climate fund with a target corpus of c.$500 million. ResponsAbility secured a c.$100 million commitment from M&G, a UK based financial institution, in the current fundraise. (August 05, 2024)
MARKET INSIGHTS & RESEARCH
Reports
‘The Coming of Age of D2C Report 2024’ by Sorin Investments shares that the D2C market is expected to grow at 35-40%, with market expected to grow from c.$17 billion in FY23 to c.$61 billion by FY27. This expansion is fueled by substantial investments of c.$4.1 billion between FY20 and FY23. Technological adoption is also a critical factor, with 65% of D2C brands already leveraging AI and analytics to stay ahead of the curve. Key drivers include enhanced customer experience, personalization, and the integration of omnichannel strategies. However, challenges like OEM dependency, high customer acquisition costs, and talent acquisition remain. Ongoing trends include the increasing importance of sustainability, hyper-localization, and the rise of dark stores.
KPMG’s report ‘AMMO India 2024’ dives into the Indian ammunition market. The global market, valued at c.$15 billion in 2023, is projected to grow at 4% CAGR to reach c.$22 billion by 2032, driven by geopolitical conflicts and increased military spending. In India, the ammunition market, estimated at c.$840+ million in 2023, is poised to grow at a faster CAGR of 5% due to the "Make in India" initiative and stockpile replenishment. The report highlights the need for increased R&D investment, technological advancements, and export opportunities to enhance India's self-reliance and global relevance in the defense sector.
PWC’s report ‘Striking gold: The rise of India’s gold loan market’ highlights that India's organized gold loan market (currently 37% of total market), valued at c.$86 billion in FY 2024, is expected to grow at a c.15% CAGR, reaching c.$170 billion by FY 2029. This growth is driven by rising gold prices, increasing demand from rural and semi-urban regions, and digital innovations in gold loan products. The market remains largely unorganized, presenting significant opportunities for expansion and formalization. Existing gold holdings with Indian households are valued at $1.5 trillion while the gold loan penetration is at 5.6%.
CBRE’s report on ‘The India GCC revolution - Where real estate and talent converge’ highlights the strategic importance of Global Capability Centers (GCCs) in India, focusing on the convergence of talent and real estate. India is acts as a global hub for talent, with over 1.3 million employees currently working in GCCs, and expected to reach 2.5 million by 2030. The report outlines the rapid expansion of real estate infrastructure to support this growth, noting a 10-15% annual increase in commercial office space dedicated to GCCs. Leasing by GCCs accounted for 37% of the total leasing in H1 2024; GCCs have leased c.$15 million sq. ft. of office space in last couple of years. 67% of GCCs intend to increase their office portfolio by 10%+ within next 2 years.
PWC’s report on ‘VIKSIT: An approach for India to achieve $1 trillion exports’ highlights that India, now the world's fifth-largest economy, has seen its trade share in GDP rise from 15% in 1980 to 46% in 2023, with exports growing from 0.4% to 1.9% of global trade. Aiming for c.$1 trillion in merchandise exports by FY30, India's strategies hinge on boosting manufacturing value, expanding market access, enhancing MSME exports, adopting advanced technology, and addressing climate change impacts. The VIKSIT framework is proposed as a strategic pathway for public and private stakeholders to drive this export growth.
Acuite note on ‘Bangladesh crisis to have a moderate impact on Indian industry’ highlights that while the political unrest in Bangladesh is concerning, its overall effect on India's trade is expected to be minimal, as trade with Bangladesh accounts for only 1.2% of India's total trade. Key sectors like textiles, which contribute significantly to India's exports to Bangladesh, may experience disruptions, with potential impacts on cotton yarn exports ($1.3 billion in FY24). However, this situation could also present opportunities for Indian garment exporters to capture the market share lost to Bangladesh.
The global AI market is expected to reach $320-380 billion by 2027, growing at a CAGR of 25-35%, with GenAI poised to dominate with 33% market share. BCG’s report ‘GenAI: The diversity game changer we can’t ignore’ outlines that the integration of Generative AI (GenAI) offers a significant opportunity to enhance gender diversity in the tech sector by helping women overcome traditional barriers. Despite high overall adoption of GenAI in India, a gender gap persists, especially at senior management levels where men dominate. To address these disparities and maximize GenAI's potential, organizations must foster inclusive environments, provide targeted mentorship, and prioritize ethical AI training, ultimately driving innovation and equity.
PWC’s report on ‘Ensuring safe and sustainable mobility in India’ shares that as India approaches becoming the fourth-largest economy, road transport, which handles over 60% of cargo, is crucial but faces rising safety risks. Despite increased vehicle safety features, road traffic crashes remain a significant issue, with two-wheelers being the most involved and affected. Addressing safe mobility requires a holistic approach, including improved infrastructure, technology-driven traffic management, and targeted safety strategies for vulnerable road users.
Articles
Jefferies identifies India as a top market for private equity (PE) investments, highlighting a significant pipeline for investment bankers. Despite challenges like liquidity squeezes, India's favourable environment for capital raising remains strong. The report also notes India's stock market resilience, with market capitalization reaching 145% of GDP by July 2024, up from 52% in March 2020, making it a prime location for PE listings despite global uncertainties. Read more.
RBI Governor has expressed concern over household savings shifting to alternative investments like equity markets and physical assets, which has made it difficult for banks to raise deposits. This shift poses liquidity risks to lenders, prompting the RBI to consider rethinking proposed liquidity norms for tech-enabled retail deposits. Despite this, the RBI encourages banks to be innovative in mobilizing deposits, even as new rules may impose additional burdens on digital deposit channels. Read more. [Paywall]
India's tech, GCC, and start-up sectors continue to grow as the country aims to become a global innovation hub. The government's budget supports this with a focus on digital public infrastructure, skilling, and innovation. Key highlights include a $250 billion tech sector revenue, the projected growth of GCCs to $121 billion by 2030, a $120 million venture capital fund for space start-ups, and the abolition of the angel tax to boost the start-up ecosystem. While the budget lays a strong foundation for making India a digital and tech powerhouse, the absence of direct overseas listing and AI governance regulations are notable gaps. Read more.
The Union Budget 2024 outlines strategic reforms to strengthen India's economy, focusing on growth, financial inclusion, and digital transformation. Key initiatives include a five-year Financial Sector Vision document, tax reductions for foreign companies, simplified FDI rules, and a market-based financing framework for infrastructure. Enhanced liquidity measures for MSMEs, independent scoring models by PSBs, and a strong emphasis on affordable housing and digital infrastructure in agriculture are also highlighted. However, the budget misses addressing AI regulation in financial services, insurance sector initiatives, and cooperative bank consolidation, which could have further bolstered economic stability and efficiency. Read more.
KPIs
India experienced the fastest growth in intangible investments from 2011 to 2020 among major global economies, surpassing the US, France, Germany, and the UK. In 2020, India ranked 14th in absolute levels of intangible investments among 26 advanced economies, positioned between Denmark and ahead of Finland and Portugal.
FDI in India's manufacturing sector surged by 69% to c.$165 billion during 2014-24, reflecting the country's growing appeal for foreign investment. Additionally, India's mobile phone imports significantly dropped while exports soared, indicating improved self-reliance.
WEEKLY MARKET UPDATE (w/c August 5, 2024)
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