A symbiotic relationship is forming between Indian entrepreneurs and domestic capital: Experts | Stock Market News

India is seeing more domestic capital flow into private markets due to the financialization of savings, growing entrepreneurship culture, and good returns, experts said at the Mint India Investment Summit and Awards 2025 in Mumbai on Saturday.

“Financialization of savings has been a story since 1991 at least. It’s moved from physical assets of real estate and gold, and it’s finding its way from bank deposits to public markets and now to AIFs,” said Imran Jafar, managing partner, Gaja Capital.

AIF is short for alternative investment funds, which, as the name suggests, are pooled investment vehicles that invest in non-traditional assets like startups, real estate or commodities. The minimum investment amount in an AIF is ₹1 crore as per regulations, restricting them to high-net-worth individuals (HNIs).

“The silver lining of India’s private equity venture capital story over the last 20 years is the exit track record over the last five years. That’s the game changer,” Jafar said.

Domestic fund sources include HNIs and family offices, among others.

Increasingly, domestic institutions like insurers, said Sudhir Sethi, founder and chairman, Chiratae Ventures. “These institutions’ participation has given confidence because when they invest, there is a very sound process,” Sethi said.

These institutions also typically invest large sums, acting as anchor investors. “For many, many years, there was no Indian anchor. In the last three to four years, we are finding Indian anchors, especially for the small funds. And by the way, even international investors get confidence because Indian capital taking risk is a vote of confidence for foreigners to come in and say, ‘hey, you know what? There must be something which I’m missing,’” Sethi said.

Another growing source of domestic funds is recycled capital—money earned from exiting successful investments, he said.

Domestic funds are also increasingly cutting larger cheques and taking a keen interest in buyout deals, which foreign investors earlier dominated, said Vikram Raghani, partner and co-chair-corporate practice, JSA Advocates & Solicitors.

A buyout transaction occurs when an investor acquires a controlling interest in an entity, as opposed to acquiring a minority stake or a strategic investment.

Raghani also said domestic funds enjoy regulatory benefits over their international peers. “There are certain shortcomings with foreign investors that do not apply to domestic investors. Our exchange control laws are still quite restrictive regarding foreign capital. There are pricing controls, there are lock-ins, which hamper exit and so on,” he added.

Meanwhile, Chiratae Ventures’ Sethi feels Indian investors now need to develop a culture of exit. “I’ve seen many people who are excited about investing. But the moment you say exit, it’s like, ‘Really, are you asking me to exit?’. We have to develop a culture of exit,” he said.

A culture of exit would also take India closer to raising a billion-dollar domestic fund, he added. “When is a venture capitalist going to return a billion dollars from one fixed fund? Then a billion-dollar fund is an easy task, right?”

“Because when you raise $300 million, you have to return—if you take a 3x net return in dollar terms—a billion dollars. And trust me, there is a science to do that right. And if that is done, to my mind, I don’t think it’s far away for us to have a billion-dollar domestic fund,” he said.

A symbiotic relationship is forming between Indian entrepreneurs and domestic capital, according to experts. The capital is funding new small-scale companies in their seeds and series A rounds. That is giving rise to a culture of entrepreneurship, generating more investment opportunities.

“Domestic poor capital has really incentivized startups. A few years ago, startups were looking to domicile outside India to raise foreign capital. But now, with more and more domestic capital, and with our capital markets outperforming most globally, we are seeing that a lot of these startups are re-domiciling back in India,” JSA’s Raghani said.