Against a background of decelerating growth globally, down from 3.5 per cent in 2022 to 2.9 in 2024, India is predicted to be on the rise, becoming the world’s fastest growing economy at 6.3 per cent and the third largest world economy by 2030.
Archana Jahagirdar, founder and managing partner of Indian venture capital firm Rukam Capital, explains that changing demographics in the country lie behind the growth.
Jahagirdar had a background in writing and reflects that writing and investing are a similar activity in that, in both cases, the focus is on finding new ideas before they become mainstream.
“You have to have a bullshit filter as lots of founders promise you the moon and the stars,” she says. “And you have to have the ability to make sense of fuzziness – it all needs to come together.”
Rukam Capital is a USD19 million venture capital fund, managing third party capital entirely in India. The fund has made an exit from one of its portfolio companies – Pilgrim, at a multiple of 5.36x within two years.
Jahagirdar says that the Indian market is very robust for people thinking of starting new businesses. “There is lots of talk and momentum in big cities and now that is percolating down to tier two and three towns where there are people in their early 20s with a college degree, maybe the first person in their family to have a first degree, and they are looking to be wealth creators and not job seekers which was not the norm earlier.”
Previously, graduates would be seeking either government jobs or a job in the private multinational sector, she says, adding that there has been a lot of government outreach to make this mainstream.
“Shark Tank India has taken the whole entrepreneurship theme into people’s living rooms so as an investor we are in a good situation with lots of high-quality deal flow and India is undercapitalised in terms of risk capital.”
The first indicators of new businesses growing in India were when the first internet bubble occurred, Jahagirdar says. “That became the big wealth creator but there was not enough risk capital so the first five to seven years a lot of those start-ups were in consumer tech, mostly platforms. The next stream of start-ups featured companies such as Flipkart, which was one of the biggest exits where significant risk capital had been deployed.
“Since then, in the last five years, we have also been seeing high quality pure play consumer companies emerging in India, focusing on beauty, personal care, makeup and other fast moving consumer goods.”
Jahagirdar says that virgin territory lies in slow moving consumer goods such as white goods and kitchen appliances and that there are not enough products to service this.
“The advent of Millennials and Gen Z has seen a distinct change in behaviour as they are looking for products and services that echo their lifestyles. “And Indian legacy firms don’t do such a great job providing what they want,” she says.
“The millennials also have their own unique not typical consumer buying patterns not just based on price. People are looking for companies and products that speak their language and resonate with what their desires are. International but with an Indian core to it.”
She gives an example of a cookware company in the firm’s portfolio, which started with cast iron ‘healthy cookware’ offering better health now that non-stick is out of fashion.
“There are more and more nuclear families as the new trend is they are more likely to stay away from their parents, so setting up their own kitchens and homes with more freedom to pick their own products.” This particular firm was direct to consumer and has only recently gone online.
There is also another group of people whose needs have changed, Jahagirdar says, and these are the over sixties. “It is predicted that in another 10 years they will be a large number and will not live the way we saw our grandparents live – they want to eat better, travel better and be fit. They have a lot of interest in longevity, and they don’t want to become infirm. They want to stay engaged and productive for far longer.”
She also notes the rise of consumer snack brands. “A lot of products that we use whether food, or snacks were unbranded and typically came in a bag with poor packaging and poor shelf life so it’s a big opportunity to take these products into the branded space because all the consumers want brands now.”
Looking forwards, Jahagirdar says that as a firm they are bullish and long on India. “It’s not just from an emotional way of thinking,” she says. “But there are certain underpinnings of the economy and ways consumer behaviour is changing from deprivation to plenty which is good for consumption overall and cuts across all people not just the well off which tells me that this market is going to deepen.”
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