India continued to outperform the rest of Asia-Pacific in terms of fundraising activities in 2016. Capital allocated to India increased by 8 percent while the overall allocation in Asia-Paci?c declined by about 16 percent in 2016, according to a Bain & Company’s India Private Equity Report 2017.
The country has seen capital from abroad pour in. For example, the Dubai-based asset manager Samena Capital has joined India’s Catalyst Management Advisers to launch a $150 million private credit fund. Asian private equity giant Baring Private Equity Asia (BPEA) is also fundraising for its first $74 million India-focused credit fund after its acquisition of Religare Global Asset Management’s credit unit in India.
New asset classes like alternative investment funds (AIFs) have been a huge contributor to overall fundraising in the market. Registered AIFs, as a category, has grown significantly, contributing around 41 percent to overall fundraising in 2016, compared to 11 percent in 2014.
The Securities and Exchange Board of India, the country’s market regulator, broadly defines AIFs under three categories: category I for venture and infrastructure funds; category II for private equity and debt funds; and category III for hedge funds.
Another trend in the Indian market is the growing contribution of non-banking financial companies (NBFCs) in the country’s total deal value, especially deals in the banking, ?nancial services and insurance (BFSI) sector where traditional bank financing is less accessible.
Many foreign investors have shown interest in participating in those strong-performing NBFCs, housing ?nance companies and micro?nance institutions. Investments in Janalakshmi Financial, Edelweiss and Shriram Transport Finance were some of the large NBFC deals of 2016.
To attract more investment, the Indian government has made various improvements to its regulatory system. For example, the government has encouraged investments through policies such as fast-tracking approvals for industry and infrastructure projects, as well as relaxing Foreign Exchange Management Act (FEMA) rules to provide easier access to capital for domestic investment funds.
The report notes it’s expected more global private equity funds will be looking into the Indian market which already has over 250 participating and active funds. New deal structures such as venture debt are also fast emerging as a trend, with companies like InnoVen Capital, Trifecta Capital and IntelleGrow showing increased activity.