By Rounak Lodha, Investment Professional, BlackSoil Capital

For the better part of a decade, India’s private capital markets largely rewarded rapid expansion over operational efficiency. Investor appetite for growth was strong, allowing many businesses to prioritise market share and scale, while profitability was often viewed as a milestone for a later stage of growth. Today, it has evolved. 

Investors are no longer evaluating businesses solely on how fast they can grow. Increasingly, they are assessing whether that growth is sustainable, and how efficiently capital is being deployed, and whether the business can remain resilient through changing market conditions. The numbers reflect this shift. Indian tech startups raised nearly $7.2 billion in H1FY26, while the number of deals declined by almost 43% year-on-year, indicating that investors are becoming more selective in deploying capital. Growth remains an important consideration, but it is no longer sufficient on its own. 

At BlackSoil Capital, this evolution is evident across our investment and lending decisions. As a leading alternative credit platform financing businesses across diverse sectors and growth stages, we do not see growth and profitability as opposing objectives. What matters is disciplined growth, top-line expansion supported by a proven business model, sustainable unit economics, and prudent capital allocation. These are the factors that underpin long-term value creation and form the basis of our underwriting approach. 

This distinction becomes even more important from a lender’s perspective than from that of an equity investor. Equity investors may be willing to support a longer path to value creation if they have conviction in a company’s future potential. Debt, however, is ultimately repaid through business cash flows rather than future valuation expectations. As a result, our assessment goes beyond headline growth metrics. We seek to understand the quality of that growth, the resilience of underlying cash flows, and the company’s ability to generate sustainable returns over time.

Ambition is rarely the constraint in India’s entrepreneurial ecosystem; capital discipline often is. India’s opportunities across climate tech, deep tech, fintech, healthcare, and consumer sectors remain vast and underpenetrated. Withholding growth capital from fundamentally strong businesses in pursuit of premature profitability can limit long-term value creation. 

The challenge for both founders and capital providers lies in recognising when a business has demonstrated sufficient operating strength to accelerate expansion and when it must first strengthen its underlying economics. Every incremental rupee invested should contribute to durable value creation rather than compensate for an unproven business model. 

This is where alternative credit can play an important role. It provides businesses with flexible growth capital that enables expansion, supports working capital requirements, and preserves founder ownership by reducing unnecessary equity dilution. For companies with strong fundamentals and clear visibility on cash flows, private credit can complement equity capital and support the next phase of growth without compromising long-term value creation. 

The market today is not characterised by a shortage of capital, but by greater selectivity in where it is deployed. Investors are looking beyond headline growth to access the quality, resilience, and sustainability of business performance. Companies that combine disciplined execution with sustainable growth are likely to attract capital on the best terms and emerge as the strongest winners in the next phase of India’s growth journey.

Interview By: Kashish Srivastava