- Date : 26/04/2022
- Read: 5 mins
The private equity industry is shaping India's growth story. They are heavily invested in these sectors for the future. Which are the sectors and why are they after them? A detailed report.
India is a favourite for Private Equity investments after America and China. Considering the expanding economy, market size and potential, PE/VC firms pay key attention to India in emerging trends for investment. The last decade witnessed an astounding growth of PE investments in the country with a cumulative investment of $232.4 Billion between 2011-and 2020.
New Decade - New Opportunities
The 2020 pandemic widely influenced the investment decisions of PE firms in India. But soon after 2020, when the country was on its path to recovery, India emerged as a leading market for fresh investments from around the world. Today PE/VC firms are at their best phase of investment activity in the country. We can attribute a few well-sought reasons to their decisions.
- India's GDP contracted 10% during the tough times. Today, they forecast it to grow at 8% per year by 2021-2025. A lucrative number any investor would not like to miss. Check this article for a detailed report.
- The rebound of Indian Stock markets- The benchmark indices doubled in 2021, showing India's path to growth after recovery. Thanks to PE investor interest in emerging sectors.
- Atmanirbhar Bharat/Make in India Initiative: India strategically used the pandemic to announce its path to self-sufficiency. As a result, the government banned the import of certain goods/services into the country, providing a valley of opportunity for local manufacturers. This excited investors in boosting local enterprises in return for generating multiple fold returns.
Because of all such factors, 2021 alone witnessed a $77.5 Billion PE/VC investment inflow into the country. Almost twice that of 2020 A number that is expected to cross the $100 Billion mark in the next year or two.
New economy- New Investment approach
Private Equity investment firms had to let go of their old investment approach to cope with the soaring demand in the new economy. The pandemic indeed flipped the way we live our lives, thus a phase shift in the economy was inevitable. Real Estate, infrastructure, banking, and manufacturing were all the darlings of investors in the past decade. But from 2021, it is a different ball game.
Any company pivoting its operations using technology created attention among investors. Tech is the buzz for investments in the country today. Major investments of PE/VC firms were in tech in 2021.
Sectors Leading the Race:
Below mentioned are some sectors with the highest PE/VC investment involvement in 2021. As a wise investor, it is always better to follow the smart money. PE/VC firms never buck the trend and are smart enough to predict emerging markets.
The consumer tech sector has experienced significant growth because of easy access to the adoption of digital products. This had led to rising investments in sectors like Ed-tech, FinTech, E-commerce and Food-Tech. Check this article for a detailed report.
Most Private Equity investment in India is through startups. Indian startups have paved the way for investors to extend their contribution to trends they wish to succeed in the times to come. Indian startups are on their way to rapid expansion through robust growth and quick customer acquisition. Early investors in consumer technology startups in the last decade like Flipkart, Paytm, Zomato, BharatPe, and Swiggy are sitting on 100× returns on their investments.
Top Sectors to Invest in the Private Equity Industry:
Fintech- Financial Technology Services are hotspots of the Indian Startup space. With the world moving towards decentralization, Fintech in India is helping people to reduce their dependency on physical banking services. Fintech is luring customers with attractive features like Buy Now, Pay Later(BNPL), zero maintenance, joining charges, high-interest payout on deposits, and all-digital banking, targeted toward the weak spots of conventional banking institutions.
Though these companies don't come up with healthy balance sheets or P/L reports, their impeccable ability to scale and expand rapidly with a higher cost of acquisition makes their business model viable in the long run.
So if you are an investor looking to catch multiple fold returns down the lane, then Financial Tech is a space you should pay close attention to. From, the likes of Paytm to PhonePay and the recently valued CRED.
EdTech- Every investor has his eyes on EdTech. The education technology space in India is growing at a rapid pace, almost doubling customers in two years. Targeted at kids from primary to high school, their convenience to study at home at their own timings is becoming a success for these companies. Byjus is leading this EdTech space with its solid team.
Healthcare and Insurance- One of the most undervalued sectors, funnily called the stepchild of investors, is now one of the most sought after sectors. After the pandemic left everyone in distress, a massive spike in demand for medical services over the last 15 months has led to a 1.6x increase in investment in medicine and healthcare.
We have multiple opportunities piling upon us day by day. It is our duty to do thorough market research before investing to mitigate any unforeseen situations in the future.