Indian AIF Industry 30% growth YoY -Rs 12lakh cr

 

In continuation to my previous article on which AIF performed last month we now have come up with detailed insights on the growth of the 3 categories of AIF starting from 2013 to till date. The Industry has witnessed significant growth and product penetration has increased significantly with a multi-product strategy where unlisted, factor investing, momentum-based rebalancing, unlisted stocks, and pre-IPO placement products have found a new growth path for the AIF industry. Indian AIF industry has grown 10X in the last decade and is worth Rs. 12.3 lakh crore . Cat II AIFs include private credit funds that grew the most during this period at 37%.

Category I AIFs

These funds are designed to provide social and economic benefits, focusing on areas like startups, infrastructure, and venture capital.

• Commitments:
• Grew significantly from ₹1,417 Cr in Sep 2013 to ₹83,493 Cr in Sep 2024, reflecting strong investor confidence.
• The last 12 months alone saw notable growth, indicating sustained interest in socially impactful investments.
• Fund Raise:
• Increased from ₹235 Cr in Sep 2013 to ₹45,797 Cr in Sep 2024.
• The steady rise suggests better execution and an expanding base of investors.
• Investments:
• Investments rose from ₹197 Cr in Sep 2013 to ₹39,115 Cr in Sep 2024, reflecting substantial capital deployment in relevant projects.

 

2. Category II AIFs

Focused on private equity funds, debt funds, and other unleveraged strategies.

• Commitments:
• Jumped from ₹2,101 Cr in Sep 2013 to ₹9,76,045 Cr in Sep 2024—a massive expansion indicating a strong preference for this category.
• Fund Raise:
• Surged from ₹907 Cr in Sep 2013 to ₹3,44,474 Cr in Sep 2024, demonstrating consistent traction in attracting investors.
• Investments:
• Climbed from ₹717 Cr in Sep 2013 to ₹2,86,959 Cr in Sep 2024.
• This significant increase showcases robust demand for private equity and debt funding opportunities.

 

3. Category III AIFs

These funds employ complex strategies, such as hedge funds or long-short equity, aiming for higher returns.

• Commitments:
• Grew from ₹308 Cr in Sep 2013 to ₹1,83,545 Cr in Sep 2024, signaling gradual investor acceptance of high-risk, high-reward strategies.
• Fund Raise:
• Rose from ₹225 Cr in Sep 2013 to ₹1,11,232 Cr in Sep 2024, with a sharp increase over the past 5 years.
• Investments:
• Grew from ₹145 Cr in Sep 2013 to ₹1,23,310 Cr in Sep 2024, reflecting growing confidence in leveraging alternative strategies for portfolio diversification.

 

4. Overall AIF Market (Total)

• Commitments:
• Increased from ₹3,826 Cr in Sep 2013 to ₹12,43,083 Cr in Sep 2024, with over 30% growth in the past 12 months alone.
• The rapid growth highlights a booming AIF market, driven by structural reforms and investor interest.
• Fund Raise:
• Jumped from ₹1,367 Cr in Sep 2013 to ₹5,01,503 Cr in Sep 2024, reflecting increasing institutional and retail participation.
• Investments:
• Climbed from ₹1,059 Cr in Sep 2013 to ₹4,49,384 Cr in Sep 2024, showcasing successful deployment of raised funds into diverse opportunities.

30% YoY Growth: The last 12 months highlight the robustness of India’s AIF sector, despite global economic uncertainties.

1. Exponential Growth:
• The AIF industry has seen tremendous growth across all categories, underlining its emergence as a key player in India's financial ecosystem.
2. Category II Dominance:

Category II dominates the AIF landscape with the highest commitments, fundraises, and investments, driven by private equity and debt fund strategies.  Accounts for 78% of total commitments, driven by private equity and debt funds.

1 YEAR GROWTH STORY

September 2023

• YoY Growth:
• Commitments (Total): +36% (₹9,54,397 Cr)
• Fund Raise (Total): +16% (₹3,88,537 Cr)
• Investments (Total): +15% (₹3,53,353 Cr)

Strong growth is driven by continued confidence in Category II, which accounted for 82% of total commitments.

12. September 2024

• YoY Growth:
• Commitments (Total): +30% (₹12,43,083 Cr)
• Fund Raise (Total): +29% (₹5,01,503 Cr)
• Investments (Total): +27% (₹4,49,384 Cr)

India’s AIF market crossed the ₹12 lakh crore mark, driven by all categories:

• Category II commitments grew by 25% YoY to ₹9,76,045 Cr.

• Category III investments surged by 56% YoY, reflecting rising sophistication among investors.

·        The overall 30% YoY growth in commitments reaffirms India’s position as a promising market for alternative investments.

Conclusion:

Further As India crosses critical economic milestones, such as achieving a per capita GDP of $2000, its population’s consumption and investment habits are entering a super cycle. By 2031, the nation is poised to see monumental changes in its financial behaviour, driven by an expanding middle class, rising incomes, and increasing sophistication in investment strategies. By 2031, India is projected to have 360 million households with a per capita GDP exceeding $2200. This milestone will significantly alter the nation’s financial ecosystem. Furthermore, the number of households with an annual income exceeding $35,000 is expected to grow by 350% from 2021 to 2031, creating a vast pool of high-net-worth individuals.