India Impact Equity Investment Report Q2 2014(July 24, 2014)


Welcome to our quarterly impact equity investment reports which track private equity transaction activity for
impact investing in India. Through these reports, our intention is to help share knowledge and be a helpful
resource for private equity investors and impact businesses seeking to expand their operations and impact
on the BoP in India. Our previous report provided insights on the trends we had observed as active day-to-day
participants in this market through the first quarter of 2014, and this report continues with the same focus on
impact investment activity in the second quarter of 2014.

Executive Summary

In Q1 2014, impact investments were a vital contributor to transaction volume, comprising 31% of the volume of overall private equity and venture capital transactions in India. In Q2 2014, this number dipped with 19 impact equity investment deals, 21% of total reported deal volume, but still equaling the number of 19 impact deals in Q2 2014 .

Some of the key trends in impact equity investing in Q2 2014 included:

  • A continuing trend of most investments in seed and early-stage impact businesses was observed, reflecting the youth of this sector;
  • BFSI sector got back on the top with 5 transactions in Q2 2014 equaling their record in Q2 2013. The financial services sector picked up with 4 deals in Q2 2014 from 1 deal in Q2 2013, and was still among the leaders.
  • Weakening in the Renewable Energy sector with 2 transactions closed in Q2 2014 compared to 4 in Q2 2013.
  • Strong growth in IT & ITES sector with 3 deals in Q2 2014 compared to none in Q2 2013.
  • This quarter saw a downward turn in the number of impact investors in the from 14 (Q2 2013) to 11(Q2 2014), but an upsurge from mainstream India-dedicated investors from 2 (Q2 2013) to 6 (Q2 2014);
  • Some recent exits like Aavishkar’s first fund getting a full exit from Milk Mantra, have attracted an even greater investment interest in the impact investing sector from non impact investors.
  • We remain positive on impact equity investments this year, and third quarter should see increased investments in the wake of a new government, perceived to be more corporate and investment friendly. The new budget proves government’s support to investors and entrepreneurs