India In Sight #81
Weekly updates on Indian private markets.
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Key reports in this edition:
Indian startups - Annual Report 2024 by Entrackr
Annual funding report by Inc42
Themes for financial sector in 2025 by Jefferies
Indian consumer durables and EMS sector report by Nomura
KEY DEALS
Equity
Botanic Healthcare, a herbal extracts manufacturer and exporter, raised c.$30 million from Stakeboat Capital and Abakkus Asset Manager at an estimated valuation of c.$120 million. (January 03, 2025)
[Exit] Resilient Innovations, BharatPe's parent entity, is looking to sell c.25% stake in Unity Small Finance Bank, an MSME loans and supply-chain finance company, for an estimated c.$800 million. (January 04, 2025)
Credit
Mufin Green Finance, an EV and green financing player, secured c.$18 million in debt from US DFC for onward lending in the sustainable finance space. (January 04, 2025)
Aye Finance, an SME lending startup, raised c.$13 million in debt from Northern Arc, ASK Financial Holdings, MAS Financial Services, and CredAvenue.
Vedanta Resources is looking to raise c.$1 billion to prepay and refinance its high-yield debt. (January 03, 2025)
The National Bank for Financing Infrastructure and Development (NaBFID) invested c.$90 million in NDR InvIT, an InvIT managed and sponsored by NDR Warehousing, via long-term bonds issued by the InvIT. (December 31, 2024)
KEY FUNDS AND FUNDRAISES
Accel, a global venture capital firm, marked the final close of its eighth India focused fund at c.$650 million. (January 02, 2025)
MARKET INSIGHTS & RESEARCH
Reports
Entrackr’s ‘Indian startups - Annual Report 2024’ highlights that in 2024, Indian startups raised $14.4B across 1,337 deals, led by e-commerce ($3.5B) and fintech ($3.2B) with 13 startups going public, setting a new IPO record. 2024 marked recovery and sectoral growth, setting the stage for a promising 2025.
Inc42’s Annual funding report predicts a 25% increase in funding amounts and a 29% rise in deal counts in 2025. High-potential sectors include climate tech, deeptech, and B2C fintech, while startup M&A are expected to thrive. Marquee VC funds will target significant gains through pre-IPO stake sales and listings.
Jefferies’ report on ‘Themes for financial sector in 2025’ highlights 2025 as a potential "Year of Easing", with slower loan growth projected at 11-13% due to moderated demand and regulatory measures. Asset quality pressure is expected to ease in FY26, with private banks favored for their stronger growth potential, while PSU banks may face slower growth.
Nomura’s report on ‘Indian consumer durables and electronic manufacturing services (EMS) sector’ highlights structural growth in the sectors driven by PLI schemes, local manufacturing, and rising domestic and export demand. The AC and cable segments show strong growth, while other categories face subdued demand. The EMS sector is projected to grow at 25% CAGR until 2030, driven by mobile exports and increased local value addition.
Motilal Oswal’s ‘Bulls & Bears - India valuations handbook’ highlights key trends in public markets for 2024. Nifty delivered 9% returns, and midcaps and smallcaps outperformed largecaps. DIIs recorded their highest-ever inflows, while FIIs experienced net outflows. Healthcare, Real Estate, Telecom, and Technology were top performers. India’s market cap surged by c.25%, outpacing global market cap growth of c.10%. Key sectors for 2025 expected to be IT, Healthcare, BFSI, and Real Estate.
Articles
Commercial real estate is set to thrive in 2025, driven by infrastructure growth, sustainability and tech focused designs, urban migration and affordable housing demand. Increased demand for Grade A shopping and office spaces to result from rising spending and the return to office trends. [Paywall] Read more.
Foreign inflows into Indian government bonds are expected to decline in 2025 after hitting a record high in 2024, driven by India's inclusion in JPMorgan's emerging market debt index. Read more.
In 2024, fixed-income investors shifted toward alternatives like direct bonds, offering 10-14% returns, as tax benefits across instruments became aligned. For 2025, investors are advised to adjust asset allocation based on age and risk tolerance, potentially increasing fixed-income exposure with age. Read more.
Bond demand in 2025 is expected to remain strong, driven by long-term investors like insurance firms, with the 10-year yield expected to reach 6.5% by March. Supported by benign interest rates and robust domestic demand, challenges from foreign flow fluctuations are expected to be absorbed. [Paywall] Read more.
Retail investor participation in India's equity market has seen a 10x surge since the pandemic, with their numbers crossing 100M in August 2024 and rising to 109M by December, marking a historic annual increase. Read more.
RBI increased gold purchases since October to diversify its reserves, mitigate revaluation risks, and minimize currency volatility. Part of the reserves, which have declined from record highs since September, is being used to cushion the rupee's depreciation against the US dollar. [Paywall] Read more.
KPIs
RBI is likely to reduce policy rates by 50 basis points in the 1H 2025, following steps to ease liquidity and lower the Cash Reserve Ratio. While these rate cuts could boost economic growth, they may temporarily pressure banks' Net Interest Margins and affect asset quality, particularly for public sector and smaller banks.
India's rural-urban consumption gap is narrowing significantly due to government initiatives like direct benefit transfers and improved rural infrastructure. States like Bihar are making notable progress with declining inequality and poverty.
RBI's Systemic Risk Survey highlights that private capital expenditure is unlikely to revive within the next year, despite the RBI's optimistic growth forecast. Concerns about global uncertainties and domestic inflation and growth remain, though the financial sector outlook remains positive.
India's economic growth slowed to 5.4% in Q2, but recovery is expected, supported by strong festive demand, rural consumption, and potential interest rate cuts. The RBI forecasts 6.6% real GDP growth for 2024-25, with a continued focus on fiscal prudence, targeting a fiscal deficit below 4.5% of GDP.
WEEKLY MARKET UPDATE (w/c December 30, 2024)
Note: YTD values (excluding FII and DII cash flows) calculated w.r.t. January 2024 for this edition.
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