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$1Trillion India’s Private Markets: Pay-To-Play


Photo of India Growth Story

By AltG Research On Behalf Of Taponeel Mukherjee & Poornima Vardhan


How much would you have today if you had invested $2 Million in Bajaj Finance this day 20 years back? Around $1.65 Billion. Not a bad outcome, I guess. 825X your money in USD terms. But the question is, what's the next Bajaj Finance?


India is the fastest-growing major global economy, and investors are asking how do we tap into this growth opportunity? Essentially, how do we find tons and tons of businesses that give us the "Bajaj Finance outcome"? Headlines adorn the financial media ranging from "India's private equity race for growth" to "Private capital will be attracted to the India growth story despite some bumps ahead". The critical takeaway is India's Private Markets are the big play.


But, a careful look at some other headlines coming out of India regarding India's startups points towards failed businesses, corporate governance lapses and investors struggling to return capital, with return on capital being a distant dream. So, suppose I were sitting and looking at this market. In that case, the perplexing question is how to make sense of this opposing dynamic of the fastest-growing market in the world where apparently investors are struggling to make money.


Therefore, investors must understand the dynamics at play. Let's shape this up point by point.


Firstly, the VC-funded startup scene struggling in India is a small component of the market. It's struggling due to a multitude of factors, the primary one being that VCs were force-feeding business models in India that were simply irrelevant to the Indian market. The Indian markets are unique. India leapfrogged the physical phone and went straight to the mobile, India leapfrogged the computer for mobile internet, and India leapfrogged credit cards and went straight from cash to cutting-edge digital payments; the key takeaway is India works differently. One of the biggest reasons the so-called "new-age" investments are struggling is due to non-existent business models, force-feeding China/US-based business models in India, and an investment community essentially having no idea about how businesses in India run and operate.


Secondly, you will ask how big the private market in India is. Forget new businesses; the existing companies in India's private markets generate over $1 Trillion in revenue and over $100 Billion in profits. As the famous saying goes, There Is A Time To Reap And A Time To Sow. Today is the time to reap! If you're an investor, the question you need to answer is how do you invest in India's Private Markets. It's $1 Trillion today; it will be north of $10 Trillion in the next two decades.


Thirdly, the question is, how do you generate returns? What matters far more than the fact that India's growing at 7% is that sectors are growing at 15-20% annually, and there are companies within those sectors growing at 30-50% annually via India's private markets. As an investor, the real opportunity for India to unlock growth further and for global investors to generate returns is partnering with 100s of these small companies to provide the required capital to help them grow. That's the opportunity in India's private markets.


India's private markets are teeming with the next Bajaj Finances. As we like to say, What matters is not the next 100 Billion Dollar business but what are the next 100, Billion dollar businesses. Investors need to realise India's private markets are massive. A few bad players with a disproportionate share of PR, questionable ethics and sub-standard investment ability do not define the greatest $10 Trillion opportunity of the 21st Century, India. India is the greatest trade of the 21st Century, and India’s Private Markets are set to deliver generation-defining returns. You've got to pay-to-play with the correct investment frameworks and business models!

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