According to the latest annual report by India’s Impact Investors Council, impact-focused enterprises in the country raised a total of $2.9bn in 2023, compared to the $6bn raised the previous year.
A total of $2.9bn (€2.6bn) was raised by impact-focused enterprises in India in 2023, a sharp drop from the $6bn raised the previous year and $6.9bn raised in 2021, according to the latest report from Impact Investors Council (IIC), GSG Impact’s national partner in India.
The authors of the annual India Impact Investment Trends report, which throws light on key investment trends in India, say the drop in private equity investment resulted from both a decline in deal volume as well as a decline in the value of investments.
The report finds that in 2023, the funding environment focused on modest sized deals into enterprises that demonstrated a visible impact focus, whilst noting a decline in large-ticket, growth and later-stage investments whose contribution to the total investment volume has dropped from 14% in 2022 to 9% in 2023.
Speaking to Impact Investor, Girish Aivalli, CEO of the IIC, said he was not surprised by the decline, saying it was a “temporary blip” that reflected investor sentiment globally and not just in India.
“India will continue maintaining an upward trajectory in the long term given the compelling investment opportunities which it offers across multiple impact sectors,” he said, explaining that the $2.9bn figure given in the report was not exhaustive as impact investors were not required by law to disclose their investments.
Aivalli said that more recent data had shown a slightly higher cumulative investment of more than $3bn into impact enterprises in 2023.
“In 2024, impact enterprises have already raised $4bn to date. The rebound in impact investing in India is unmistakable.”
Sector focus
In 2023, 275 impact enterprises in total raised capital, spanning critical sectors such as agriculture, climate tech, education, financial inclusion, healthcare, and technology for development.
Of these, the climate-tech sector attracted the largest share of deal flow, with $804m raised across 123 deals, followed by the financial inclusion sector, in which 48 deals raised a combined $695m. Fintechs and SME financing companies dominated the financial inclusion sector, which the authors said is also experiencing growing intersection as enterprises increasingly leverage digital lending towards SME borrowers.
Aivalli said the popularity of these two sectors was reflective of the growing recognition of the pressures presented by climate change and India’s fiscal opportunity, which is driving the need for greater financial inclusion for India’s population of more than 1.4 billion people.
“This is supported by the sheer size of India’s market, democratic political stability, a stable and non-fluctuating currency, responsive legal recourses, a vibrant stock market for exits, a large talent pool, including a strong IT talent pool and a responsive government.”
Deal flow
The report also reveals an uptick in deal flow in Q4 of 2024, highlighting two large deals of $340m raised in December by Udaan, a B2B e-commerce platform helping SMEs secure inventories from major brands, including enabling access to financial products and services, and $420m raised by online pharmacy PharmEasy in November.
Divya Pinge, head of research for IIC, told Impact Investor that Udaan had helped small retailers and kirana stores – small, local convenience stores found across India selling groceries and essential household items – to develop their businesses.
“In the case of kirana stores, Udaan’s technology acts as a lever to boost their operational efficiency, helping them to adopt digital payments and streamline purchases. These are areas which traditionally, small retailers in non-metro locations would be constrained by,” she explained.
Pinge described PharmEasy as a one-stop shop for medicines, medical diagnostics and wellness products and said the company was expanding into semi-urban and rural areas of India.
“To date these markets have been underserved as far as access to good quality and affordable healthcare is concerned,” she added.
SDG alignment
According to the Standard Chartered SDG investment map, India needs $2.6trn in investment to meet the UN’s SDGs by 2030, highlighting the significant opportunity for private capital investment.
The report finds that in 2023, SDG 3: Good health and Wellbeing, SDG 8: Decent Work and Economic Growth, and SDG 9: Industry, Innovation and Infrastructure received the most funding, which Pinge said came to a combined total of just under $1.5bn.
“With one of the biggest deal sizes of the year, PharmEasy has directly contributed to SDG 3,” said Pinge. “SDG 8 has also attracted investment because of sectors such as financial inclusion, agriculture and technology for development, which cumulatively have been drawing in high quantities of investment and impacting the livelihoods and economic growth of underserved populations.”
Pinge said SDG 9 was attracting investment from three main sectors – climate tech, financial inclusion and technology for development, which included investment into areas such as sustainable mobility and SME finance as well as into technology which was being increasingly leveraged to drive social and economic inclusion.
“These three areas are highly innovative, drive industrial growth and are supported by the Indian government’s focus on digitisation, SME growth and environmental sustainability.”
Focus on gender
The report dedicates a chapter to the area of gender-lens investing, revealing that 17% of the 275 impact enterprises that raised capital in 2023 are led by female founders. This proportion has remained stable over the last three years, though the funding raised by women-led enterprises saw a decline of more than 70% in 2023 when compared to the previous year.
Aivalli said that gender lens investing in India was still in its infancy, but that it was evolving and that it was “too early to measure investments by statistical yardsticks.”
The highest deal value of a female-founded enterprise was $60.2m, raised by LeadsConnect, an agritech company helping farmers manage risk and enabling sustainable farming.
