India aims to accelerate space technology investment as China races ahead

Private equity investments in commercial space technology companies are poised to accelerate in India, while investments in China's space tech sector surged to their highest annual total since at least 2020.

Private equity- and venture capital-backed investments in Chinese spacetech companies totaled $1.17 billion this year as of Nov. 12, already 38.2% higher than the full-year 2024 total of $844.4 million, according to S&P Global Market Intelligence data. In India, the spacetech sector absorbed $83.1 million in private equity investment this year through Nov. 12, nearly equaling the full-year 2024 total of $83.9 million.

Spacetech companies design and manufacture space equipment and subsystems, such as spacecraft, rockets, satellites and launch vehicles, and provide deep-space communication, in-space propulsion, simulation testing and satellite monitoring services.

Government investment funds have played a central role in building the spacetech sector in China, where trade tensions have eroded investment by foreign private equity and venture capital firms. By contrast, recent policy reforms in India are opening the door to private investment in the country's emerging spacetech sector, Meghan Welch, a managing director at investment bank Brown Gibbons Lang & Co., said in an interview.

"India, even though it is a smaller share of global space funding overall, is accelerating very rapidly [and] moving up the curve in terms of its dominance in that sector," Welch said.

India opens to venture capital investment

India's government launched initiatives to attract more venture capital investments into spacetech.

The Indian National Space Promotion and Authorization Centre (IN-SPACe) selected SIDBI Venture Capital Ltd. earlier this year to manage a venture capital fund of approximately $112.2 million targeting investments in spacetech startups over the next five years. The fund was approved by the Securities and Exchange Board of India in October.

IN-SPACe is an autonomous agency created in 2020 by India's Department of Space to boost domestic private sector participation in the growing space economy.

Welch said India was also making it easier for foreign funds to participate in the country's spacetech sector by relaxing regulatory requirements for foreign venture capital firms.

"From a funding perspective, they are having this rapid institutionalization and regulatory opening," Welch said.

– Catch up on the increasing use of earnouts in private equity exits. – Read about slowing UK private equity deal activity. – Download a file of raw data from this story.

The largest private equity- or venture capital-backed investment in India's spacetech sector this year as of mid-November was a $49.1 million funding round for orbital intelligence business Digantara Research and Technologies Pvt. Ltd., according to Market Intelligence data. New corporate investor Reliance Industries Ltd. led the round, joining returning investor Peak XV Partners Operations LLC.

China's scale and ambitions

The scale of private equity- and venture capital-backed investment in India's spacetech sector still trails that of China, where activity is dominated by government funding.

India's spacetech sector has attracted nearly $330 million in private equity and venture capital investment since 2022. By comparison, three Chinese spacetech companies each raised over that amount in funding rounds just this year.

The largest was a $351.1 million funding round in October for rocket developer Space Pioneer.

Even prior to the closing of that round in the fourth quarter, China was home to the two largest global spacetech deals to close in the third quarter, "reflecting continued investment in domestic launch and satellite capabilities," according to the latest edition of Seraphim Space's quarterly update on private investment in spacetech. Globally, spacetech investment reached a record $3.5 billion in the third quarter, up from $3.1 billion in the second quarter, the report added.

Seraphim Space, in a previous edition of the report, noted that China aims to develop "a space industrial base and capabilities comparable to those of SpaceX and the United States more broadly," referring to Elon Musk's Space Exploration Technologies Corp., which has played a critical role in NASA missions, including shuttling astronauts to and from the International Space Station.

Outlook

Private equity- and venture capital-backed deals are likely to follow an upward trajectory in both India and China, Welch said.

A key differentiator, however, is India's relative openness to foreign investment. For US-based investors in particular, geopolitical tensions with China and the dual defense/commercial use of many space technologies enhance the appeal of India's spacetech sector.

"You're going to see more and more investments from not only the US, but also Western governments, Western Europe, etc., as well as a number of Indian private equity firms," Welch said.