Private Capital
07 Sep 2022
Despite the challenges of COVID-19, India saw an increase in private deal activity in 2021. Over 1,000 venture capital (VC) and private equity (PE) projects were completed, totaling nearly US$ 74B in FDI. Meanwhile, the industrial policy reforms' production-linked incentives (PLI) framework has generated positive buzz, demonstrating India's intention to close gaps in its manufacturing ecosystem through private-sector investment. At the same time, many family businesses have begun to act more like venture capitalists in recent years. To invest in the future, they are developing their in-house capabilities. However, digital investments will dominate the private market, with a visible impact in all sectors. Industries that will be the focus of private equity projects:

Rise of FinTech & Financial services
The FinTech (financial technology) industry has grown tremendously during the pandemic, and the rapid adoption of digital payments has only aided in propelling the drive to the next level. The Unified Payments Interface (UPI) of India has become one of the most popular real-time payments (RTP) systems, providing convenience, safety, and security in person-to-person (P2P) and person-to-merchant (P2M) transactions. It's not surprising that neighboring countries like Nepal, Bhutan, and Singapore have expressed interest in UPI. India currently has the world's highest FinTech adoption rate of 87 percent, significantly higher than the global average of 64 percent. As a result, the outlook for FinTech players continues to be bright in 2022.
Fueling the transition to green energy
With PE deals expected to remain bullish in FY23, more buyout and control transactions will likely involve private equity firms. Furthermore, as companies and private equity funds increase their commitments to reduce carbon emissions, more capital will be mobilized to transition to greener energy sources, opening new opportunities for mergers and acquisitions (M&A).
High demand for SaaS
The rise of Software-as-a-Service (SaaS) has dramatically transformed the software industry and opened it up to a slew of new players. As the need for talent and technological innovation remains high, new business models inspired by SaaS are emerging, such as Platform-as-a-Service (PaaS), Robotics-as-a-Service (RaaS), and Data-as-a-Service (DaaS). The domestic market for SaaS in India will be more than double - specifically, it will be US$ 30B by 2025.
Transforming education with AR/VR
After the pandemic, India has seen large-scale deployments of augmented reality (AR) and virtual reality (VR) across business verticals. Technology has taken over education from skill-building programs in universities and real-world technical training to school-based learning of abstract concepts. The education industry is expected to spend more than US$ 6B per year on augmented and virtual reality technologies by 2023.
Investors eye deep tech startups
India is the next deep tech hotspot, with multiple industries such as healthcare, education, industry, and manufacturing, increasingly integrating technology into their operations. Deep tech refers to activities based on engineering and scientific innovations like artificial intelligence, robotics, quantum computing, and blockchain. Investment firms have been increasingly identifying and funding deep tech startups.
Transforming the AgriTech sector
The Indian government's goal to strengthen the agriculture sector through modern technological interventions and investment incentives are commendable. Its startup fund for agricultural technology (AgriTech), supported by the National Bank for Agriculture and Rural Development (NABARD), is expected to set up the offshore private equity and venture capital industry onshore and boost startups. The Agritech sector looks positive and will likely transform with significant agriculture budget allocations and technology adoption.
Since the private deal market experienced strong growth during the K-shaped recovery of the economy impacted by the pandemic last year, hopefully, it will be able to keep up the momentum and live up to the immense expectations and perform better with tech-based startups in 2022.
Author: Madhur Singhal, Managing Partner and CEO, Praxis Global Alliance

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