Prashanth Prakash, a partner at Accel, one of the leading venture capital firms, has highlighted robotics and precision manufacturing, alongside sectors that merge soft technology with hard manufacturing, as the next big areas for investment. Speaking during the launch of the ‘Bengaluru Rising’ report by the UnboxingBLR Foundation at the Bengaluru Tech Summit, Prakash stated that these areas, particularly robotics and precision manufacturing, are poised to capture the attention of both entrepreneurs and venture capital firms in the near future.
“I think there’s now a marrying of soft tech and hard manufacturing, coming together in areas such as robotics and precision manufacturing, because there is really a gap globally in these spaces,” Prakash said. This convergence is particularly significant in sectors such as aerospace, where India stands to play a crucial role in fulfilling the burgeoning demand for aircraft. He cited that India’s current capacity for aircraft production is far behind the demand, with the country requiring seven times the current output of two major aircraft manufacturers. According to Prakash, India is uniquely positioned to provide the additional manufacturing capacity necessary to meet the country’s aerospace needs.
While traditional companies have historically dominated these sectors, Prakash believes that an increasing number of entrepreneurs and venture capital firms will soon enter this space, leading to a surge in investments. He noted, “Areas such as space tech and aerospace will create an industry that is much larger than the software-led startup industry we have seen.” The growing appetite for these sectors suggests that India is on the cusp of becoming a global leader in precision manufacturing for aerospace and defence within the next decade. Prakash added that Accel is particularly bullish on these emerging sectors, anticipating a rise in the number of startups catering to this demand.
India’s emergence as a hub for precision manufacturing has been attributed to several factors, including the country’s technical capabilities, skilled workforce, cost advantages, and enabling government policies. Prakash further explained that there has been a marked rise in the establishment of incubation facilities dedicated to sectors like AI, robotics, and space technology. Such incubators, including Artpark (AI and Robotics Technology Park) set up by the Indian Institute of Science (IISc), as well as incubators across various Indian Institutes of Technology (IITs), are nurturing a new generation of entrepreneurs working on cutting-edge technologies.
According to industry experts, the Indian precision manufacturing market is divided into two main sectors: automotive (which accounts for 52%) and non-automotive (48%). The automotive sector is experiencing rapid growth, driven by increased demand from original equipment manufacturers (OEMs), who make up 62% of the auto components market. This sector is expected to grow at a 14% compound annual growth rate (CAGR) until FY26. Additionally, auto component exports are forecasted to grow by 7-9% from FY24 to FY29, further bolstering the precision machining market, which is expected to grow at a 12% CAGR.
The aerospace and defence sector, the second-largest consumer of precision engineering, is showing similar potential. The Indian aerospace and defence market, valued at $27 billion in 2024, is projected to double by 2033, according to a report from Ascertis Credit.
Regarding the investment climate, Prakash noted that the funding environment has been buoyant in recent months. Homegrown startups raised $3.4 billion in the third quarter of 2024, double the amount raised in the same period the previous year. This surge in funding is being propelled by the increasing number of startups considering Initial Public Offerings (IPOs), a development Prakash sees as a major milestone for the startup ecosystem. “That was the last missing piece in the startup ecosystem, and now the puzzle is kind of complete,” Prakash said.
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The IPO boom has been significant, with food delivery giant Swiggy’s Rs 11,327 crore IPO being a notable event. Swiggy’s IPO, the second-largest of the year, provided significant liquidity for venture investors like Accel, Prosus, Elevation Capital, and SoftBank, who were early backers of the company.
This boom in IPOs has also resulted in a shift in the investor ecosystem, with domestic investors, including family offices, now playing a more active role in funding startups. Prakash noted that many of Accel’s portfolio companies are preparing for their own IPOs, with expectations of more than 10 IPOs emerging from Bengaluru alone in the coming year.
The ‘Bengaluru Rising’ report highlighted Bengaluru as India’s top job destination, attracting talent not only in the tech industry but also across non-tech and blue-collar sectors. Despite challenges, the city remains attractive to young workers, non-resident Indians (NRIs), and expatriates due to its advantages in jobs, salaries, safety, air quality, and cost of living.
In conclusion, as robotics and precision manufacturing continue to emerge as crucial areas for investment, India is poised to leverage its technical expertise and workforce to become a global leader in these sectors. With the government’s support and a thriving startup ecosystem, the country’s manufacturing capabilities, particularly in aerospace and defence, are expected to soar in the coming years.
