Investcorp, the Bahrain-based global alternative investment major, has predicted India to be the world’s fastest-growing digital economy, estimated to reach a $1 trillion valuation by 2025 from $250 billion last year, fuelled by the country’s demographic advantage and rising incomes.
The bullish outlook by Investcorp has the potential for a significant uptick in investments by Middle East-based sovereign and private equity funds into several new-age sectors of the South Asian country in the near-to-mid term, experts said.
“As young consumers in the country begin transacting, their first port of consumption is likely to be online. This rapidly evolving demographic is well placed to propel India into the fastest growing digital economy, and also account for over 25 percent of the country’s overall GDP (gross domestic product) by 2025,” Investcorp said.
Investcorp said consumers in the South Asian country have become increasingly comfortable weaving technology into their everyday lives – from purchasing consumption items like food on hyperlocal delivery platforms to consuming services like education and healthcare through online subscription services.
“Covid-19 has made tech-enabled businesses not a choice, but a ubiquitous reality. As investors continue to back tech-enabled businesses, increasing amounts of capital pour into tech-enabled business models, more than doubling the number of unicorns in India from 24 in 2019 to 63 today,” the Investcorp.
Investcorp, which has a total of $37.6bn assets under management globally, has also predicted the unicorn opportunity in India to grow to over 150 over the next five years.
Strong digital infrastructure, continued business innovation, and increasing investor appetite are cited as the reasons by Investcorp for its assessment of the expected big rise in India’s unicorn graph.
“The global pandemic and the subsequent lockdown accelerated digitization in India. Investors will continue to realize the opportunity in India over the next five years,” said Gaurav Sharma (pictured below), head of private equity, Investcorp India, who has been leading the Bahrain-based investment firm’s move to significantly step up its interests in the consumer tech, healthcare, financial services, retail, e-commerce, and technology sectors in India in recent years.
Intergrow Brands, Bewakoof.com, Freshtohome, Zolo, InCred, Citykart, ASG, NephroPlus, Unilog, XpressBees, and Safari Industries are among the ventures in which Investcorp has invested in recent years.
Besides Investcorp, ADIA, Mubadala, ADQ, Investment Corporation of Dubai, and the Public Investment Fund of Saudi Arabia (PIF) are among the Middle East funds which have been leading investments in India’s start-up and big corporate sectors.
Abu Dhabi-based ADQ, in collaboration with TPG Rise Climate, made a combined investment of $1bn a few days ago in Tata Motors’ electric vehicle arm.
According to the Investcorp white paper, one of the major factors behind rapid digitization in India is a significant increase in data accessibility due to increased competitive intensity in the country’s telecom market.
“Currently, India’s cost per GB of data consumed is one of the lowest in the world – at approximately $0.7 per GB – and the quantum of data consumed per user is the highest at 14 GB per person,” the Investcorp study pointed out.
The investment major has listed several factors for its upbeat outlook on India capable of unlocking a $1trn valuation potential by 2025.
“Factors such as ubiquitous digital consumption, continued business model innovation by Indian entrepreneurs, and the growing public market appetite will drive the transformation of India’s digital economy and opportunity for investors,” Investcorp said.
The Indian investment ecosystem has been seeing strong public investor appetite as was evident in the first initial public offering (IPO) of an Indian unicorn – Zomato – which was oversubscribed 38-times. The $1bn IPO of Freshworks on the NASDAQ was another strong indicator of the ability of Indian companies to take center-stage in global platforms.
Investcorp has, however, cautioned that investors will need a combination of deep networks, local on-ground presence, technology expertise, and multi-cycle/stage investment experience to capitalize on this value creation opportunity in the Indian digital landscape.
(Except for the headline, this story has not been edited by The Technology Express staff and is published from a syndicated feed)
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