NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, July 8, 2014

Impact investments are expected to increase globally this year, with South Asia and Southeast Asia among the top target regions, according to a recent survey by JPMorgan and Global Impact Investing Network (GIIN). This could bode well, in particular, for India’s nascent impact investment sector, which is one of the most active in the region.

Intellecap, an India-based advisory firm focused on social enterprises, estimates that US$1.6 billion of capital has been invested in more than 220 impact enterprises across India, with more than half of the investments in microfinance. Unitus Capital, an impact investment-focused investment bank, expects impact equity investments in India to grow 30% this year. Along with microfinance, enterprises in agriculture, health services, clean energy, and education are attracting investments.

We recently interviewed Narayan Ramachandran, CFA, Unitus Capital’s co-chairman, on the prospects and challenges of impact investing in India. “The biggest challenge is the market/business plan challenge, which is, if you invest in something, can it grow big enough and profitable enough for you to have a range of exit options?” he said. Ramachandran noted that while there have been successful exits recently in financial services enterprises, there isn’t a long list of companies in India “that have been sold in subsequent rounds to different and new kinds of investors.”