Practical analysis for investment professionals
07 July 2014

Impact Investing in India: Poised to Grow?

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.”

Operating impact businesses in areas such as agriculture, health services, and other sectors “have really only been invested in over the last five to six years,” Ramachandran added. “There, the record is a little sketchy. Not sketchy in the sense of poor returns, but because they have not had the time to became mature businesses that allow exits.”

Domestic investors have been slow in waking up to the promise of impact investing, so most of the capital has come from overseas. Aditi Shrivastava, head of Intellecap Impact Investment Network (I3N), India’s first angel network, is working to unlock domestic capital from institutions and high-net-worth individuals for the benefit of early-stage impact enterprises.

“While there’s a lot of capital in impact investments in India, most of the capital is foreign and going to mature enterprises” she said. “There’s a need to mobilize capital and Indian expertise to help early stage social enterprises grow.”

Shrivastava added that some Indian high-net-worth individuals who are already engaged in philanthropy are still wary of the field. “We get questions like, ‘Is it ethical to expect money when the intention is to do good?’ We also have to educate them about the sectors that social enterprises are in. Many angel investors have invested in real estate and tech, but a lot of education is required to help them understand the agriculture sector, for example.”

Last year saw the creation of the first rupee-denominated impact-investing fund put together by Incube, Charioteer, and Unitus Seed Fund. The launch early this year of the India Inclusive Innovation Fund by the National Innovation Council and the Ministry of Micro, Small, and Medium Enterprises is expected to boost the availability of domestic funds. A new Companies Act 2013 rule that requires businesses of a certain financial size to spend 2% of average net profits on corporate social responsibility related activities may also have a positive impact on the impact investment sector.

Aside from mobilizing more capital, Shrivastava said strengthening the entire impact investment ecosystem in India is important to the sector’s sustainability. Enterprises in urban areas are able to tap into networks to help their businesses, but those in far-flung locations don’t have access to the same level of expertise. Intellecap says that enterprises in the Indian states of Maharashtra, Tamil Nadu, and Karnataka have cornered the largest share of impact investments so far.

“The support of impact investing around the world needs to come to small businesses in such a manner that they are helped, facilitated, and nurtured to grow into bigger mainstream businesses rather than a large impact business, which mainstream investors are not interested in,” said Ramachandran. “A different way of saying it is that impact investing is not a parallel path; it is a stepping stone to mainstreaming a particular kind of investment.”

Read the complete interview with Narayan Ramachandran, CFA, published in Asia Asset Management.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

Photo credit: ©

About the Author(s)
Heda Bayron

Heda Bayron is a communications specialist at CFA Institute in Asia Pacific. She has more than 15 years of experience in corporate communications and journalism. Previously, Bayron was a communications consultant at the International Finance Corporation, a member of the World Bank Group, and a senior press officer at Asia Society in New York. She also worked with the Hong Kong Institute of Certified Public Accountants as deputy editor of its member magazine, A Plus, where she won a Society of Publishers in Asia award for Editorial Excellence in Business Reporting. Before that, Bayron was an assistant editor at Voice of America's Asia News Center in Hong Kong for more than seven years.

10 thoughts on “Impact Investing in India: Poised to Grow?”

  1. Jamal Munshi says:

    Is “impact investing” a climate change initiative?

    1. Heda Bayron says:

      Thanks for your comment.
      While there are some impact investments that specifically address climate change, in general, impact investments are diverse, including microfinance and health services.

  2. Amitabh Brar, CFA says:

    Great Post, Ms Bayron.

    I commend you for writing an informative piece on a topic (impact investing) that doesn’t get as much attention in the CFA webpages.

    I think, though, that the ‘sketchy record of exit options’ that Mr. Ramachandran alluded to is something of a global phenomenon in impact investing and not restricted to Indian market alone.

    This is certainly not because there haven’t been enough exits but just that very little is known/written about them. The GIIN report, while it has some very useful data, also seems to missed the boat on this.

    Amitabh Brar, CFA

    1. Heda Bayron says:

      Thanks, Amitabh! The exit options challenge is indeed not confined to India. It is also a challenge in Africa, for instance. As to your point that some exits may go unreported, there is a positive trend underway for greater transparency, and better reporting and data gathering in the sector. The Indian Impact Investor Council, for instance, was formed last year to help define impact investments/investors in the Indian context (who qualifies as impact investors?) and set standards, including in measuring returns.

  3. Great post.

    Question: Are ESG, SRI, CSR, Ethical investing, Impact investing all interchangeable terms? or are they part of the same coin in doing something greater good by investing? Recently world bank/IFC has started issuing Green bonds or so called social impact bonds, where would you categorize the same?

  4. Ashok says:

    I happened to read this article only now. Very useful. Thanks for the information.

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