India Beats China in Attracting Clean Funds
India has surpassed China as the go-to destination for clean-technology funding in recent months, as efforts to shore up domestic green manufacturing are starting to attract investors.
About $2.4 billion in deals were completed in the third quarter, more than four times the value of those in China and the second-highest total globally behind the US, according to data compiled by BloombergNEF.
The momentum is being driven by India's push to build out local clean energy capacity to limit reliance on China, and the prospects of becoming an exporter of the technologies, said Raj Pai, founding partner of GEF Capital Partners, a climate-focused private equity fund.
"The attractiveness of the climate sector for both public and private capital is very high," he said.
A series of policy initiatives from the Modi government is especially giving the clean energy sector a leg up, and India likely will see the fastest rate of expansion of renewables among major economies for the rest of the decade, according to the International Energy Agency.
More than a dozen renewables and electric vehicle firms listed publicly this year, which included solar panel producer Waaree Energies Ltd. and scooter manufacturer Ola Electric Mobility Ltd. Clean power firm NTPC Green Energy Ltd. stock surged more than 30% since they started trading last month.
'Climate is the hottest topic for venture capital right now' in India, said Abhinav Sinha, head of technology and telecoms at British International Investment Plc, the UK government's development-finance arm. BII, which has invested more in India than in any other country, has committed to deploy at least $1 billion in the nation on climate-related projects by 2026.
About a quarter of all seed stage investments made into climate-related startups by venture capital groups are currently being done so in India, according to Sinha.
India narrowly lagged behind China in competition for green-technology investment in the third quarter of the year. The amount $3.6 billion fetched here lags far behind China, which collected an aggregate total of $5.6 billion. As per estimates by BNEF, investment in this area is required to amount to at least $12.4 trillion so that the 2070 goal can be attained 20 years ahead of it.
"We are not even in a pond, we are in a puddle where we need an ocean of capital", said Dhanpal Jhaveri, chief executive officer of Eversource Capital, which closed India's largest climate impact fund in 2022 and is currently investing more than $125 million in energy demand services.
Among India's roughly 800 climate-focused startups, only a quarter have raised capital in the past decade, and the total of about $3.6 billion is far below the more than $19 billion attracted by fintech firms over the same period, IIMA Ventures and Mitsubishi UFJ Financial Group Inc. said in a September report.
Green startups have typically also struggled to attract growth-stage funding, according to the report.
You have to constantly demonstrate traction, and that you have bigger customers and that you are building something", said Akshay Shekhar, CEO of Kazam, a Bengaluru-based startup that supplies EV charging software and hardware.
However, the climate technology market is likely to boom as companies are finding ways to reduce pollution in India, which ranks as the third-largest emitter of greenhouse gases.
In October, Mumbai-based early-stage investor Avaana Capital raised $135 million to deploy in sectors including energy and supply chains. It has backed electric mobility, solar financing and agriculture firms. More and more family offices and other funders are now supporting the sector, according to founding partner Anjali Bansal. "We are very optimistic because we see all of this development", she said.
