Net FDI inflows sink 96% to record low
Net foreign direct investments (FDI) into India dropped 96.5% in FY25, as a red-hot IPO market provided multi-bagger exits to long-term investors in companies such as Hyundai Motor and Swiggy, while several local firms invested heavily overseas to benefit from a global supplychain rebalancing.
Net FDI in the previous fiscal year amounted to $353 million, lowest on record, compared with $10 billion in FY24, showed the Reserve Bank of India (RBI) data, published late Wednesday in its latest monthly bulletin.
'Net FDI moderated… reflecting the rise in net outward FDI and repatriation FDI,' the RBI said.Net inflows of 'stable' FDI were 86% lower than the 'volatile' portfolio flows, which totalled $2.67 billion for the year, according to the RBI.Net FDI represents the difference between gross FDI and outward direct investments by Indian firms, along with strategic investment withdrawals and repatriation by overseas entities, such as private equity investors, venture capitalists, and India-dedicated funds.
Increased repatriation is one of the reasons for the decline in net FDI, with $49 billion being withdrawn from India in FY25, compared with $41 billion the previous year. The fiscal year provided exits to investors such as Alpha Wave Global and Partners Group in bulge-bracket initial share sales of companies such as Swiggy and Vishal Mega Mart.'PE/VC exit strategies have evolved, with a total of $26.7 billion realised, representing a 7% year-on-year increase,' according to a report by the Indian Venture Capital and Alternate Capital Association (IVCA) and EY.The report highlighted that open market exits dominated, while PEbacked IPOs gained momentum, supported by a capital market offering robust opportunities for investor exits. Hyundai lowered its stake from 100% to 82.5% in its Rs 27,870 crore listing with promoters taking back home the amount IPO fetched, while a top foreign investor in Swiggy has made more than $2 billion after the IPO. Telecom major Singtel also sold its stake in Airtel while the proceeds of Tobacco major BAT's stake sale in ITC in March 2024 likely reflected in the FY25 repatriation numbers.India's benchmark indices had surged to a record late September last year, and several mega IPOs were lined up coinciding with the surge in equity gauges.
REFLECTS MATURITY The report further indicated that this trend signals a 'mature market,' allowing foreign investors to smoothly enter and exit, which 'reflects positively on the Indian economy.' Gross inward FDI experienced robust growth of 13.7%, reaching $81 billion during 2024-25, as per RBI data. This investment remains concentrated in sectors such as manufacturing, financial services, electricity and energy, and communication services, which collectively account for more than 60% of total FDI, the RBI said.Additionally, local firms increased their overseas direct investments to $29 billion, up from $17 billion last year. Experts suggest that this trend reflects an increase in overseas investments by Indian firms in a globalised economy
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