Raise Capital to Drive India’s Consumer Goods Sector Growth

India’s consumer goods sector spanning fast-moving consumer goods (FMCG), direct-to-consumer (D2C) brands, packaged foods, and consumer durables is a powerhouse fueling national economic growth. With a projected market size of $220 billion by 2025 and a CAGR of 14.9%, the sector thrives on rising disposable incomes, shifting urban-rural demand dynamics, and increasing digital adoption.

To unlock hyper-growth through geographic expansion, product innovation, technology integration, omnichannel strategies, and ESG (Environmental, Social, and Governance) alignment, companies must strategically raise capital. This article serves as a guide for senior leaders in India’s consumer goods sector to explore financing options and align their capital-raising strategies with sustainable, tech-driven growth.

The Current Environment to Raise Capital in June 2025

• VC/PE Trends: Focus Shifts to Profitable Growth

Today, venture capital (VC) and private equity (PE) investors have shifted their focus toward profitability and strong unit economics instead of topline growth alone. For instance, VC funding in consumer tech including D2C brands rose by 80% in deal volume during 2024, indicating renewed confidence in scalable and capital-efficient models.

Moreover, investors such as Accel India ($550 million fund) and Nexus Venture Partners ($450 million fund) are actively backing consumer goods startups with solid financials and clear growth visibility. ESG-focused FMCG companies are also gaining traction with impact investors like Lightbox Ventures, largely due to increasing global demand for sustainable and responsible practices.

• IPO Pipeline: D2C and Specialty FMCG Brands Step Up

Meanwhile, India’s IPO market continues to thrive. A total of 23 D2C and specialty FMCG brands are preparing for public listings in 2025. Notably, BlueStone (targeting ₹1,000 crore) and Wakefit (₹468 crore) are leveraging IPOs to raise capital for retail expansion and marketing.

In fact, the 7x increase in IPO exit value in 2024 has established public markets as a viable route for raising long-term growth capital, while simultaneously offering liquidity to early investors.

• Government Incentives: PLI and Budget 2025 Measures

In addition, the government has introduced policies that improve access to capital. The Production-Linked Incentive (PLI) scheme for food processing with a ₹10,900 crore outlay through FY2026-27 is stimulating domestic manufacturing and exports.

Furthermore, Budget 2025 increased MSME investment and turnover limits, thereby easing access to collateral-free loans. Likewise, recent changes in GST input credit regulations have helped firms optimise working capital more efficiently strengthening their readiness to raise capital through both debt and equity markets.

• Credit Markets: Lending Trends in Mid-Market FMCG

The private credit market remains robust. In 2024, it registered $9.2 billion across 163 deals a 7% year-on-year growth. Consequently, mid-market FMCG firms are increasingly utilising instruments such as non-convertible debentures (NCDs) and bonds.

For example, a ₹3,200 crore debt deal in the steel sector points to growing lender appetite for well-governed firms. However, to raise capital through these instruments, businesses must maintain strong cash flows and transparent governance practices.

• Consumer Demand and Inflation Impact

On the demand front, growth among middle and lower-middle classes moderated to 4.3% during August–October 2024 due to persistent inflation. Meanwhile, commodity prices particularly for palm oil and wheat have remained volatile, squeesing margins.

As a result, companies have adopted strategies like shrinkflation and selective price hikes. Therefore, investors are now prioritising firms with resilient demand strategies, such as those successfully penetrating rural markets (which account for 35% of FMCG sales). To raise capital effectively, businesses must now ensure stable and predictable demand.

1. Growth Strategy and Capital Needs

• Consumer goods companies at various stages of maturity require distinct approaches to raise capital:

1. D2C Startups aim to secure funds to build backend infrastructure, invest in ad-tech for customer acquisition, and meet regulatory standards like FSSAI and GST. Capital enables rapid brand-building and CAC:LTV optimisation.
2. Scaling FMCG Firms typically need capital to expand manufacturing capacity, enhance logistics, and deepen their reach across rural and omnichannel markets. Additionally, funding supports participation in the projected $76.8 billion online grocery market by 2032.
3. Mature Players, by contrast, raise capital for inorganic growth, ESG transitions, or digital upgrades. For example, ITC’s acquisition of Yoga Bar and HUL’s investment in Minimalist reflect a shift toward premium and ESG-aligned segments.

2. Strategic Options to Raise Capital

To support market expansion, firms can pursue multiple financing strategies.

• Equity Financing

Equity investments especially PE and VC rounds offer both funding and strategic guidance. For instance, Accel’s investment in Swiggy highlights the value of long-term partners. IPOs also help companies raise capital at scale, as illustrated by Bluestone ₹1,000 crore offering. In parallel, strategic investors like Reliance offer more than just money they bring ecosystem access and retail integration.

• Debt Financing

Debt remains a critical option, particularly for companies that prefer not to dilute equity. Financing tools such as working capital loans, invoice discounting, and external commercial borrowings (ECBs) are widely used.

For example, a regional FMCG player recently issued NCDs at a 14.5% coupon to refinance operations demonstrating that it’s possible to raise capital affordably through well-structured debt instruments.

• Alternative Financing

Alternative mechanisms are also emerging. Revenue-based financing and royalty models are ideal for D2C firms with tight margins. Moreover, supply chain financing via platforms like Finly helps free up working capital without balance sheet stress.

Sustainability-linked funds further support companies that are ESG-forward, allowing them to raise capital while signaling environmental commitment.

• Government Schemes

Government-backed schemes are equally crucial. SIDBI’s collateral-free loans, Mudra financing, and PLI-linked credit support are increasingly popular. Additionally, export-linked subsidies and agro-processing clusters help lower entry costs especially for startups in food and beverage categories.

3. Common Challenges in Raising Capital for Market Expansion

• While financing opportunities abound, several structural issues persist:

1. Thin Margins and Input Volatility: Unpredictable commodity prices erode margins. Thus, companies must highlight operational efficiencies to appear investor-ready.
2. Valuation Gaps: In the D2C segment, revenue projections often overshoot realistic performance, leading to deal friction and delays in the capital-raising process.
3. Regulatory Compliance: Non-compliance with FSSAI, GST, or ESG regulations can derail due diligence. Therefore, firms must build legal infrastructure before approaching investors.
4. Fragmented Distribution: India’s diverse retail landscape increases go-to-market complexity, often requiring capital-heavy strategies to achieve nationwide reach.
5. Tech and Governance Deficiencies: Investors shy away from companies lacking modern ERP/CRM systems or showing poor board practices. Improving these systems is essential to raise capital.

4. Hybrid Consulting Lens for Growth Strategy

• To raise capital effectively, firms must adopt a hybrid consulting lens that combines management, finance, legal, and technology expertise.

1. Go-to-Market (GTM) Alignment: Companies should demonstrate a clear GTM strategy backed by SKU performance, CAC:LTV ratios, and rural penetration plans.
2. Legal Preparation: Organising a robust data room, completing IP audits, obtaining FSSAI clearances, and ESG documentation help fast-track investor approvals.
3. Financial Modeling: Accurate financial forecasts, complete with ROCE targets and inflation-adjusted buffers, create confidence among prospective financiers.
4. Technology Enablement: Investment into AI/ML for demand forecasting, along with ERP and CRM systems, signals operational maturity. In turn, this boosts investor interest.
5. Investor Relations: Crafting a persuasive narrative around omnichannel scalability, ESG alignment, and customer stickiness enhances the firm’s appeal and ability to raise capital.

Illustrative Examples

• D2C Brand Series C Raise: A health-focused D2C brand secured ₹80 crore in Series C funding to expand its offline presence and upgrade cold chain capacity capitalising on the wellness boom.
• Regional FMCG Debt Raise: A mid-sized FMCG company raised ₹50 crore through debt to automate packaging lines and meet CPCB’s EPR norms, improving both compliance and scalability.
• Legacy Brand ESG Pivot: A heritage personal care brand used a ₹30 crore sustainability-linked fund to launch an eco-friendly product line, boosting its ESG scores and investor attractiveness.

Conclusion

India’s consumer goods sector is at a pivotal stage of transformation. While the market offers immense potential, success depends on a company’s ability to raise capital strategically and responsibly.

By tackling structural challenges such as fragmented supply chains, tech lag, and regulatory ambiguity and embracing hybrid consulting solutions, businesses can better position themselves for growth. Government incentives, combined with rising ESG awareness and digital tools, further enhance financing possibilities.

In conclusion, raising capital is no longer a one-dimensional financial act it is a multi-layered strategic move. With the right capital strategy, companies in India’s consumer goods sector can scale sustainably, dominate new markets, and deliver long-term stakeholder value.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

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