Investors from all over the world are still interested in India’s private markets, despite the ongoing funding winter. In fact, New York-based investment manager Zephyr Peacock is seeking to raise $200 million to provide growth capital to Indian enterprises, with a majority of the funds coming from North America.
India’s strong appeal to global investors is largely due to the changes in China’s engagement with the world. As China has disengaged from the world stage, opportunities for India’s private market are being recognized. This can be seen in the decrease in foreign direct investments into China and the decline of China’s weightage on the MSCI All Country Index. Meanwhile, India’s weightage has increased significantly, making it a more attractive destination for global funds looking for growth opportunities and capital deployment.
Despite the increased interest in India’s private market, investors are exercising caution due to the changes in the global economic landscape. The so-called ZIRP (Zero Interest Rate Phenomena) is a thing of the past, and the pandemic has brought attention to irrational valuations and unsustainable businesses. As a result, Zephyr Peacock has increased the target fund size to $200 million, demonstrating its confidence in the strategy and opportunities available in India.
However, the funding winter has also had a positive impact, as startup founders have learned to focus on cash flows and profitability. According to Mohit Gulati, president and chief investment officer of Zephyr Peacock India, founders are now more disciplined, and investors are more sophisticated. As the bubble of excessive valuations winds down, there are opportunities for good investments. Overall, the climate for India’s private markets looks promising, and investors are poised to take advantage of these new opportunities.