Impact Investing in India to grow from $1bn in 2015 to $6-8bn by 2025: McKinsey research

Impact investing in India has the potential to grow from $1 billion in 2015 to $ 6-8 billion by 2025, revealed a McKinsey Research report at the Impact Investment Conclave, Prabhav 2016, in Delhi.

With over 50 active impact investors and a cumulative investment of $4.1 billion since 2010 in more than 350 enterprises, India has emerged as one of the largest impact investment destinations in the world.

Impact investments in India are focused on the areas of clean-tech, financial inclusion, agriculture, healthcare and education. Conventional private equity and venture capitalists have contributed over 44 percent of the impact investment capital in India, with the rest coming from specialised impact investors.

Impact investors have played a vital role in seeding early-stage enterprises, who account for over 60-70 percent of capital in smaller investments with deal sizes less than $5 million.

The sector has seen promising financial returns. Based on the study of nearly 50 exit deals, the median internal rate of return was found to be 10 percent, and it can only get better over time given the projected growth rate of over 20 percent of underlying social sectors and a steady GDP growth of 6-7 percent.

Impact investing industry body the Impact Investors Council (IIC) has kicked off the Impact Investment Conclave, Prabhav 2016, in Delhi.

Organised in partnership with the Investment and Technology Promotion Division of the Ministry of External Affairs, Prabhav 2016 will take place over three days. With 50 active impact investors, Prabhav 2016 is bringing top leaders from as many as 175 global impact investors to India to meet potential investees.

Sandeep Farias, Chairman of the IIC and Founder of Elevar Equity, says,

It is perhaps no exaggeration to say that India leads the world when it comes to social entrepreneurship, and yet, we are just getting started. IIC’s aim is to help build this sector over the next decade. We hope that through the dialogues at Prabhav 2016, we will be able to have a meaningful conversation on the risk-return trade-offs, performance of investors, social impact measurement, and other relevant issues.

The conclave also conducted field trips for the key investors in Delhi, Mumbai and Bengaluru, where they got the opportunity to visit a few social enterprises and meet their founders. These enterprises included Drishti Eye Care, LabourNet, Y-Cook, INI Farms, Greenway Appliances, NeoGrowth Credit, Suryoday MicroFinance, Avanti Learning, Sewa Grih Rin and Skymet.

“Impact investing, as suggested in the McKinsey report, could grow six to eight times in the next decade, reaching about $6-8 billion in annual investments by 2025 from the current $1 billion. This eightfold expansion of impact investing in India could make life better for millions and generate competitive returns for investors,” says Amit Bhatia, CEO of the Impact Investors Council.