India has outpaced China as a destination for clean technology funding in recent months, as efforts to boost domestic green manufacturing help attract investors.
Deals worth about $2.4 billion 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, data compiled by BloombergNEF show.
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 Prime Minister Narendra Modi’s government is boosting the clean energy sector in particular, and India is likely to see the fastest rate of expansion of renewables among major economies through the rest of the decade, according to the International Energy Agency.
More than a dozen renewables and electric vehicle firms have publicly listed this year, including solar panel producer Waaree Energies Ltd. and scooter manufacturer Ola Electric Mobility Ltd. Shares in clean power firm NTPC Green Energy Ltd. have advanced more than 30% since they began 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 in India by venture capital groups are currently being made into climate-related startups, Sinha said.
Though India rivaled China for green technology funding in the third quarter, the $3.6 billion raised this year lags behind China’s total of $5.6 billion, BNEF data shows. Accelerating India’s path to net zero to hit the target 20 years ahead of the current 2070 target would require investment of as much as $12.4 trillion, according to BNEF.
“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 need to keep showing traction, and that you have larger customers and that you are building something,” said Akshay Shekhar, CEO of Kazam, a Bengaluru-based startup that supplies EV charging software and hardware.
Still, the climate technology market is forecast to expand rapidly as firms develop solutions to curb pollution in India, the world’s third-largest emitter of greenhouse gases.
Mumbai-based early-stage investor Avaana Capital, which has backed electric mobility, solar financing and agriculture firms, in October raised $135 million to deploy in sectors including energy and supply chains.
Family offices and other funders are also increasingly backing the sector, said founding partner Anjali Bansal. “We are very optimistic because we see all of this development,” she said.
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