India’s first three decades after liberalisation were powered largely by consumption and savings. Services expanded, brands flourished, and domestic demand drove growth. Capital formation, however, remained relatively restrained.

History offers a revealing contrast. In the 1980s, 1990s, and early 2000s, China invested relentlessly in factories, supply chains, and industrial capability. That phase of asset creation laid the foundation for extraordinary wealth creation over the following two decades.

India is now entering a similar phase.

This transition is visible not in narratives, but in numbers. Government capital expenditure has compounded at over 25% annually over the last five years and now stands at roughly 4.4% of GDP, the highest level in decades. Private sector investment is following. When capital formation accelerates, value creation shifts away from surface-level consumption and towards capacity, capability, and institutional scale.

Historically, such phases reward capital that arrives early.

Where wealth is actually created

Public markets reward predictability and visibility. By the time a business lists and becomes widely tracked, much of its growth is already visible and reflected in valuations. Across markets, empirical evidence suggests that nearly 75% of value creation is captured before listing, while post-listing phases are largely about liquidity, capital preservation, and incremental growth.

Very early-stage investing sits at the opposite end of the spectrum. While outcomes can be extraordinary, uncertainty is high. Business models are still evolving, execution risk is elevated, governance remains untested, and liquidity timelines are long.

Pre-IPO investing occupies the most efficient middle ground.

Our approach is deliberately different. We seek to participate after the business model is proven, but before value is fully discovered. This is the zone where enterprises have crossed their most fragile phase, yet still retain substantial headroom for scale, margin expansion, and market re-rating. In simple terms, it allows investors to capture a large part of the opportunity while consciously avoiding a large part of early-stage risk.

This is also where valuation asymmetry becomes meaningful.

Valuation asymmetry in practice

Consider defence manufacturing. Listed defence companies in India often trade at earnings multiples of 45x to 60x, reflecting order visibility, strategic importance, and public-market participation. In the unlisted space, there exist defence suppliers with comparable capabilities and multi-year visibility that can be accessed at materially lower valuation levels simply because they are not yet visible to public markets.

This gap is not risk. It is inefficiency. And inefficiencies tend to close rapidly once companies enter the public spotlight.

Why this pre-IPO cycle is structurally different

India has seen private investing cycles before, but the current phase is fundamentally different in quality and scale. Earlier cycles were driven largely by financial engineering or short-term liquidity events. Today’s pre-IPO opportunity is shaped by long-duration capital formation.

First, enterprises are institutionalising far earlier. Regulatory frameworks, digital infrastructure, GST formalisation, and global customer requirements are forcing governance, compliance, and process maturity well before listing.

Second, the buyer universe has changed. Globally, over 75% of pre-IPO capital is deployed through professional investment platforms, primarily by family offices and sophisticated investors. India is rapidly converging towards this model.

Third, scale is arriving before listing. Many Indian enterprises now reach meaningful revenues, profitability, and order-book visibility well ahead of IPOs, shifting value creation upstream.

Together, these shifts mean pre-IPO investing today is no longer speculative. It is early institutional participation in businesses that are already structurally sound, but not yet publicly visible.

Sectors where India’s scale is still undiscovered

We focus on sectors where global demand is vast, India’s current share is modest, and capital formation is accelerating. These are step-change opportunities.

Defence technologies: Global defence spending stood at approximately $2.5 trillion in 2024 and has historically grown at 5–6% annually during periods of geopolitical realignment. At this pace, global defence expenditure could exceed $4 trillion by 2034.

If India captures just 3% of that global market, it implies over $120 billion of annual defence production and exports, compared to today’s base of roughly $18 billion (about ₹1.5 lakh crore). Select private defence companies can grow at twice the industry growth rate as they move from components to complex systems, creating powerful early-cycle opportunities.

Aerospace: The global aerospace market exceeds $240 billion, with manufacturing historically concentrated in the US and Europe. Rising costs and capacity constraints are accelerating supply-chain diversification. Even a 4–5% migration of global aerospace manufacturing and services to India would create a multi-billion-dollar opportunity far larger than India’s current export base.

Precision engineering: Precision engineering underpins defence, aerospace, electronics, and advanced manufacturing. While the global market exceeds $170 billion, India’s exports are well under $1 billion. Over the next five years, exports can expand 7–10x, driven by demand for high-tolerance components and complex assemblies.

Advanced manufacturing: Advanced manufacturing reflects the transformation of traditional manufacturing into IP-led platforms. Indian enterprises have spent decades building process IP, product IP, and systems capability. The valuation inflection occurs when markets recognise this transition, not when it begins.

Electronic components and semiconductors: India’s electronics requirement is estimated at $110 billion annually, historically met largely through imports. The ₹1.6 lakh crore committed under the India Semiconductor Mission is creating an entirely new industrial base with export potential. Semiconductors also catalyse growth across chemicals, gases, precision tools, automation, and testing equipment.

Healthtech and specialty care: Healthtech extends beyond hospitals into medical devices, diagnostics, platforms, and technology-enabled specialty care, including oncology, chronic disease management, eye care, and orthopaedics. These segments are expanding at strong double-digit rates and scale with IP creation and operating leverage.

Affluent consumption: India’s affluent population is expanding rapidly. Premium consumption is structurally resilient and far less sensitive to economic cycles. As wealth concentrates, premium categories benefit from pricing power, predictability, and long-duration demand.

The investor takeaway

India is entering a phase where asset creation, capability building, and industrial scale will define wealth creation. The enterprises that will matter most over the next decade are being shaped today, while they are still private, still evolving, and before public markets fully discover their value.

The spotlight always arrives late.

The opportunity is created earlier.

That is where Bharat Transformation Fund operates.