Investing in India

Market Overview

IndiaIndia’s impressive economic growth over the past decade has supported the development of a vibrant investing environment where impact investors are competing with traditional venture capitalists to source deals. As the government continues to grapple with issues related to poverty alleviation and the provision of basic services, social ventures are beginning to fill the gaps and address some of India’s most pressing issues, including health, education, energy, agriculture, livelihoods, and financial inclusion.


Market potential. India is the second most populous country in the world with 1.2 billion inhabitants, has the fifth largest economy, and yet is home to 41% of the global population living on less than $1.25 per day. With such a large low-income population and with recent government reforms to allow higher levels of foreign direct investment into the economy, India presents social impact investors with significant opportunities. Scaling enterprises within India poses challenges but also provides significant value opportunities if done correctly

Government and regulatory ecosystem. The Indian government has recently announced several overdue regulatory changes that will enable better investing into social enterprises- including recognition for angel investor pools and framing more supportive regulation for investor funds. It has also announced a US$ 1 billion fund called the India Inclusive Innovation Fund, which will be focused on social innovation, and funding and supporting small and medium-sized enterprises. With the recent creation of the Indian Impact Investor Council, a self-regulatory body to lobby for impact investing that is anchored by Aavishkar and Omidyar Network, the dialogue between regulators and impact investors is set to go further than ever before.

  • Strong entrepreneurial culture. India has a very strong entrepreneurial culture—micro enterprises abound and are encouraged. Even the poorest households are typically engaged in some form of economically productive activity. This creates a huge opportunity for fixing market gaps and building market-based solutions to poverty, such as the example highlighted below.
  • Agriculture. With 70% of the Indian rural population working in agriculture and allied sectors, the stagnation in the contribution of those sectors as a percentage of GDP from 19% in 2004 to 18% in 2011is of concern. This trend has attracted several social ventures that focus on supporting the entire value chain from pre-harvest to post-harvest. For example, Janani Foods works on increasing crop yields in a financially and ecologically sustainable fashion, while Star Agri works to resolve logistical issues such as transportation, storage, and processing. Recognizing the importance of agriculture for the Indian population, the government has instituted the capital subsidy scheme to incentivize investment in these areas.

Trusted Local Partners Enable a Deal. Charly Kleissner worked with Ankur
Capital in Mumbai to structure an investment in PBK Waste Management Solutions. PBK provides products to
help repurpose the over 120,000 tons of daily garbage produced by India’s cities. Ankur Capital is a great example of an engaged local partner. Not only did they provide the necessary oversight and coaching to get to an innovative impact term sheet, but they also co-invested in the deal.


  • Debt Financing. Utilizing debt presents an additional legal challenge for a foreign investor as it is classified as External Commercial Borrowing (ECB). Except for limited exceptions, ECB requires approval from the Reserve Bank of India (RBI). The approval process is time consuming and for all practical purposes is not a viable option for smaller debt transactions. Convertible debt is available as an option, but the debt must convert into equity at some point – return of principle is not possible (although the investment may accrue interest).
  • Equity Financing. Equity financing does not require prior approval by the RBI, although the investment must be registered with the RBI by the Indian company. Unless the equity investment is directed through either a Mauritius or Singapore investment vehicle, a withholding tax will apply to any gains on the investment.
  • Corruption. From 2010 to 2012, India fell seven spots to 94th out of 176 countries in Transparency International’s Corruption Perceptions Index. Despite significant attempts by the Government to address the issue, corruption is still widespread, increasing the cost of doing business. Investors should beware of costs and fees offered to expedite legal processes.
  • Finding and Retaining Talent. Finding top talent for social enterprises is difficult due to limited monetary resources and scarcity of human capital with management and high-level operational skills. As such, building successful management teams takes time and the burnout rate tends to be significant. When evaluating an investment, it is critical to assess the skills of the management team, their background and track record, and their contractual relationships with the venture.
  • Slow adoption. Up until 2 years ago there were few Indian impact angels. Over the last two years multiple impact angel groups were formed, such as I3N and Ennovent’s Impact Circles, which are now starting to move capital into the social space.


  • Aavishkaar. A venture capital fund focused on early stage ventures within the social impact field, particularly in education, energy, health, water and sanitation, and microfinance.
  • Acumen. Acumen is a non-profit that raises charitable donations to invest in companies, leaders, and ideas that are changing the way the world tackles poverty.
  • Ankur Capital. A social venture fund enabling start-ups impacting low-income communities.
  • Artha. A private community created to provide a space for impact investors seeking to support sustainable social enterprise in India.
  • CIIE India. Centre for Innovation Incubation and Entrepreneurship located in Ahmedabad.
  • Dasra Social-Impact. Capacity builds social enterprise and organizes social impact open sessions at which investors can seat and listen to entrepreneurs pitching their ideas for capital.
  • Ennovent. Ennovent helps their clients accelerate innovations for sustainability in low-income markets in Asia.
  • Ford Foundation. The Foundation’s goal is to address persistent poverty by empowering socially marginalized groups and improving government policies. http://www.fordfoundation. org/regions/india-nepal-sri-lanka
  • Gates Foundation. The Foundation works with partner organizations worldwide to tackle critical problems such as global development, health, and policy issues. http://www.
  • Grassroots Business Fund. An emerging markets fund with a team and investments in India.
  • Grassroots Innovations Augmentation Network (GIAN). A good place to look for social ventures.
  • Intellecap. An Indian intermediary focused on Indian enterprise offering investment banking services, a yearly social enterprise conference, and an angel network focused on social enterprise in India. Toniic members have access to this network through a partnership agreement.
  • Lok Capital. Launched with the support of the Rockefeller Foundation, Lok Capital is “a hands-on financial investor with social performance goals and standards dedicated to promoting financial and social inclusion through all its activities.”
  • Omidyar Network. A philanthropic investment firm investing in and field building social for and not-for-profit enterprises globally.
  • Toniic Asia. Toniic is a global network of action-oriented impact investors.
  • Unitus Seed Fund. Accelerating bottom of the pyramid startups.
  • Unltd India. A launchpad for social entrepreneurs in India.