India’s manufacturing bet draws millions as sector-focused funds surge

The fund is mandated to support sectors such as renewable energy, energy storage, transmission and distribution, battery materials, critical energy minerals, defence, electronics, semiconductors, medical devices, nuclear energy, and aerospace and automotive components.

“The deal size will range between ₹250 crore and ₹500 crore alongside co-investors who will invest in high-growth manufacturing companies,” said Yash Kela, founder and chief investment officer of Singularity. “We are aggressively investing in the sector and we believe that there is great potential to invest capital and get scalable exits.”

Founded in 2016, the firm has invested in several manufacturing companies such as Lohum CleanTech, HEG Ltd, Qucev, Sterling and Wilson Data Center and Silver Consumer Electrics, among others. Some of these companies may eye a public listing in the coming year, charting a viable route for exits for Singularity.

New class of sector-specific funds

Singularity’s push comes as a growing number of investors look to tap India’s manufacturing potential. While sector-specific funds remain relatively uncommon in India’s investment ecosystem, their rise suggests a shift in strategy as firms pursue more targeted exposure to high-growth verticals.

Over the past year, several firms with significant exposure to manufacturing have launched new funds to tap into the sector’s potential, even as they continue to invest across other verticals, according to data from Venture Intelligence. These include Amicus Capital, Trident Growth Partners, RevX Capital, Veloce Opportunities Fund, Finnolve, Folks Motor, and Arka Investment Advisory.

Amicus Capital has raised $171 million in its first close for a fund targeting $200 million. Trifecta Capital has raised $120 million toward a $240 million goal, while Trident Growth Partners has secured $117 million toward a target of $234 million. While these funds maintain diversified strategies, each has significant exposure to the manufacturing segment.

Even smaller firms are reorienting strategies to tap the opportunity.

Capital-A, a seed-stage investor, has pivoted its $50 million second fund to focus on manufacturing and deeptech. Founder and lead investor Ankit Kedia attributed the move to “macroeconomic tailwinds in the country which are pointing towards a very strong manufacturing sector”.

Other sectors, including proptech, media and climate tech, have also seen increased interest from sectoral funds over the past year. While such strategies have existed in the Indian investment landscape for some time, they are increasingly coming to the fore as investors seek to make more focused bets on sunrise industries to maximize returns.

This uptick in activity comes as private equity and venture capital investors look to identify the next wave of companies that will strengthen supply chains and accelerate India’s shift toward an export-led economy.

Several large manufacturing deals have materialized this year. VIP Industries raised $206 million in a round led by Multiples. Euler Motors secured $75 million from GIC and British International Investments, while Scimplify raised $40 million in a deal led by Accel and Omnivore Partners. Rangsons Aerospace also raised capital in a round led by ValueQuest.

According to Venture Intelligence, firms have raised close to $1.9 billion in 2025 so far, about 60% of last year’s total of $3.2 billion across 123 deals.

Macroeconomic tailwinds and policy push

The momentum reflects a shift triggered by pandemic-era supply chain disruptions, which exposed India’s reliance on imports and prompted a policy and capital push toward local manufacturing. Several venture capital firms and startups began aligning their focus accordingly.

“We are seeing strong tailwinds from the China-plus-one strategy, which is driving both domestic and global demand for more resilient, distributed, and technology-enabled supply chains,” said Prashant Prakash, partner at Accel.

Accel recently announced its eighth fund with a $650 million corpus, and has identified manufacturing as one of its key focus areas. The firm has previously invested in companies such as Zetwerk—which derives most of its revenue from international markets—automated composite manufacturer Fabheads, and Nabhdrishti Aerospace, a gas turbine engine company.

Motilal Oswal Alternates, another firm leaning into the shift, has strengthened its team over the past two years to sharpen its focus across various manufacturing sub-segments.

“Defence, electronics, automotive and other components are getting added to the entire manufacturing sector,” said Prakash Bangla, managing director at the firm, adding that the construction and building materials segments are also expected to pick up.

Government initiatives have also played a catalytic role. In 2020, a production-linked incentive (PLI) scheme was launched across 14 sectors, including medical devices, pharmaceuticals, IT hardware, and drones, with a total outlay of ₹1.97 trillion. As of August last year, realized investments stood at ₹1.42 trillion, according to an official release.

However, earlier this year, Reuters reported that the government does not plan to extend the scheme beyond its current scope, citing delays in subsidy payouts and difficulties in ramping up production in some sectors.

“What it helped with was to get the ecosystem running. For folks who wanted to build and survive, they’ve found a way to do it,” said Kedia, adding, “Any business that depends on PLI was never a business to start with.”

He cautioned that while industries like smartphones, pharma and electronics manufacturing services (EMS) are blue-chip, manufacturing startups must build clear differentiators or risk margin compression across the board.

Still, investor interest remains buoyed by targeted policy interventions. Earlier this year, the government launched a new PLI scheme focused on EMS sector, with a proposed investment of ₹59,300 crore and projected incremental production of ₹4.6 trillion.

EMS players, whose components serve defence, medical devices, and consumer appliances, are already seeing traction.

“Aerospace and defence, medical devices and semiconductors will be split 40:40:20. India is going to be a huge driver for our semiconductor vertical,” said Kaushik Mudda, founder and CEO of Ethereal Machines. Currently, about 80% of the company’s revenue comes from exports to other nations.

The precision manufacturing startup, backed by Peak XV Partners and Steadview Capital, expects its revenue mix to shift as the national manufacturing focus deepens. Defence and aerospace account for 70% of revenue, while medical devices make up 20%. General engineering and semiconductors contribute 5% each.

The flip side of the EMS sector, according to Kedia, is concentration risk, where a company’s revenue is concentrated to one or two clients. If they lose those, they risk going under. “Eventually, for the EMS ecosystem to thrive and survive, they’ll need a mix of large, medium and small customers, so they can de-risk and not have more than 10% concentration from one client.”

Opportunities and gaps

Still, challenges remain as India attempts to position itself as a credible alternative to China. Experts say it may take another 10 to 15 years to close the capability gap.

“At the moment, we still rely on China when it comes to tools and tool designing. The other aspect is top-end talent to actually set up plants in sectors like EMS. For a sector like semiconductor manufacturing, we still hardly have the engineers available,” said Amarjeet Singh Makhija, partner and markets lead advisory for startups and unicorns at PwC India.

Capital-A’s Kedia noted that we don’t necessarily need cheap labour to compete with China. “We are seeing that there are ways to automate it, and that’s the lever playing out in many startups today, and this will further drive investments in the space.”

Recent data underscores the tension between bullish sentiment and the real economy. India’s manufacturing activity rose to a 14-month high in June, with the HSBC PMI climbing to 58.4 from 57.6 in May—well above its long-run average of 54.1.

Yet the Index of Industrial Production (IIP) tells a more muted story. Industrial output grew just 1.2% in May, the slowest pace in nine months. Manufacturing, which accounts for nearly 78% of the index, expanded only 2.6%, down from 3.1% in April and sharply below the 5.1% growth seen a year earlier.

As capital, policy, and global demand converge, investors are betting that India’s next manufacturing leap will be built not just on cost arbitrage—but on capability.

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