Indian Renewable Energy Sector Has Potential For $10 Bn Investment in 2023

India could draw close to $10 billion in renewable energy investment in 2023, which would be a positive given that public markets are still mostly closed to large-scale capital raising, according to Bank of America Corp’s top management.

As investors aim to reflect the energy transformation in their portfolios, deals and investments will continue to flow into sectors like green hydrogen and electric vehicles, according to Kaku Nakhate, the lender’s president and country head for India.

Sectors including renewable energy and retail stand to gain as India surpasses rival emerging market competitors in luring foreign investors. Even if rising interest rates and market turbulence have hurt dealmaking globally, the South Asian country’s geopolitical stability helps it prepare itself for greater inflows.

The Indian government’s specific goals to reach net zero carbon, according to Nakhate, wowed investors and businesses at the bank’s most recent North American roadshow. The bank will keep expanding its distressed debt finance business in the renewable energy industry, which has produced double-digit returns.

Nakhate anticipates a rise in deal-making in consumer brands together with green investment, which is supported by increasing per capita income and consumption.

“To enjoy the distribution tale, you will need a variety of brands, if you want to play the India story. The bank anticipates that the so-called friend-shoring by businesses who are reevaluating their supply chains as a result of Covid and the Ukraine war will also benefit India. India is well-suited to draw this wealth thanks to its democratic traditions and solid domestic markets,” Nakhate added.

IPO Roadblocks

The situation in initial public offerings cancels out the optimism. Despite a global fall in first-time share sale volumes this year, India’s decline of almost 60% compared to the same period in 2021 outperformed the decline globally, according to statistics.

Because investment banks all over the world have reduced employees and bonuses, Nakhate stated that Bank of America does not intend to make any substantial hiring in India in the upcoming year. 

Subhrajit Roy, India’s head for global capital markets at Bank of America, predicts that large IPOs of $1 billion or more won’t likely return until the end of 2023 or into 2024. But he said that the market might already see medium-sized listings by the middle of the following year. For both businesses and investors, a change in risk appetite is still in its early stages.

There is some action on the market. The block trades worth over $6.6 billion have been reported in India this year, accounting for close to 28% of the total in Asia.

According to Roy, “There was a significant demand for secondary share offerings from Asian investors and developing market funds. Both Softbank Group Corp’s approximately $200 million block sale of Indian digital payments business Paytm and Uber Technologies Inc.’s $390 million sale of shares in food delivery company Zomato Ltd. were assisted by Bank of America.”