The Economic Times: January 01, 2015
Mumbai: The positive outlook among investors seems to have rubbed on to social sector-focused investments as well, with venture capital funds focused on the social sector planning to raise something in the region of Rs5,000 crore in 2015.
Also called impact investing, these social sector-focused funds put money in companies that have the potential to usher in social change in the country. Industry trackers say that in the coming years, impact investing in India could be the highest in the world — in terms of the money pumped into these companies
The total cumulative impact investments have crossed Rs10,000 crore across 220 social enterprises and are at a tipping point. "We believe that annual impact investment in India will cross the $1-billion mark in 2020, and cumulative investments will exceed $6 billion, or Rs40,000 crore, by then," said Amit Bhatia, CEO, Impact Investors Council, a self regulatory body for the funds.
Industry watchers say that fund raising in the sector is registering a cumulative growth of around 20-25%. At present, there are about 300 social enterprises which are set to jump to 1,000 by the end of 2020.
According to a report by Intellecap, an advisory firm focused on social enterprises, there are around 100 social venture funds (SVFs) in the sector. It attributes the sudden spurt mainly to the global investors' focus on India. Also, most of the social sector funds have given decent returns in the last ten years, even at a time when many big private equity funds faltered due to a host of reasons, including depreciation of the rupee.
Of the 100 funds, Aavishkaar, one of the biggest, would be raising anywhere around $400 million, orRs2,500 crore, by the end of 2015 through two funds. If Aavishkaar manages to successfully deploy the funds, it would also look to raise an additional fund of anywhere around $500 million, a senior company official said.
"The positive sentiments following the new government have certainly helped. But investing in these social enterprises is not like giving donations or government subsidies. What India needs are entrepreneurs starting for-profit organizations that bring in the change at the bottom of the pyramid," said Vineet Rai, CEO and MD, Aavishkaar.
Industry experts say that apart from Aavishkaar, some of the other funds that would be raising money in the coming year are Acumen, Lok Capital, Omnivore, Ankur and a couple of others. The total capital that these funds plan to raise would touch around Rs5,000 crore, the highest-ever raised in the sector.
But the big question is whether these funds will be able to perform? "Only those people can raise funds in India who have a track record and have given sustainable returns to their investors. We have seen that investors are satisfied with a return of anywhere between 10% and 12% from the impact investing funds," said Vishal Mehta, co-founder and MD of Lok Capital.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.