By AltG Research On Behalf Of Poornima Vardhan And Taponeel Mukherjee
As our team wrote today's newsletter, our analyst ran an online news search on "India's Private Markets". The top 3 search results given below are a perfect mix to discuss the enormous opportunity that India's private market presents and yet the challenge in tapping into the goldmine!
Why private capital in India is ready for a reset in the Economic Times
India's private equity race for growth in Private Equity News
Why India's PE growth is more pull than push in Private Equity International
Here's a flavour of what the articles discuss and our firm's views on the path forward:
"Profitless unicorns and the upcoming shakeout" - The article discusses the proliferation of loss-making and non-revenue generating unicorns that won't survive because they do not have a business model or product the consumer wants. What's baffling is when we analyse India's private markets today using AltG's APEXX Formula, we see 30,000 existing private companies with a high-quality revenue pool of more than $1 Trillion and a profit pool converging on $100 Billion. This revenue pool will be closer to $15 Trillion over the next three decades.
Takeaway: India's existing private markets are where the opportunity lies. This is a market for investors to supply capital, scale and structure via large platforms. There's A Time To Reap And A Time To Sow, Now Is The Time To Reap.
"It was a lot easier to do deals five years ago than it is now" - One solution suggested in the article is having a sector focus; however, we don't believe that's the solution. Private equity GPs and LPs' biggest challenge in India is that they're designed to do large ticket-size deals. "Large is the enemy of the great."
Takeaway: The fund structure is where the challenge is. The real question that needs answering is how do you tap into the next 100 companies that will be worth a Billion Dollars each in the next decade? They're worth $20-50 Million today. Unless you can structure a fund that can deploy capital across a multitude of platforms, you will struggle to allocate. We see $1 Trillion in revenues through our APEXX Formula, and the opportunities for generating exceptional risk-adjusted returns abound.
The SINGLE BIGGEST OPPORTUNITY for an India Focused Private Market strategy is to focus on building the $200-300 Million platforms to address the biggest gap in the market - 1000s of private companies with Trillion of dollars in revenue and large global investors with Billions of AUM - This is the 10X opportunity!