During my MBA in Finance, one of the concepts that deeply resonated with me was Asset Liability Management, or ALM. It fascinated me how critical it was for banks and financial institutions to align the tenor of their lending (assets) and borrowings (liabilities) in order to stay solvent and successful over the long term.
What struck me even more was how this concept applies just as effectively outside of banking. In the manufacturing sector, for example, capital expenditure is typically funded through long-term, patient capital like term loans. Operating expenses, on the other hand, are managed using shorter-term facilities such as overdrafts or working capital lines. No business would seriously consider funding a multi-year Capex project using short-term credit instruments. It simply doesn’t add up.
If one truly understands this financial principle, it becomes easier to see that India’s structural transformation – particularly the adoption of technology systems within mid to large-scale businesses – is best understood as a form of Tech Capex. These are not quick fixes or short-term software implementations. These are infrastructure-grade projects that require thoughtful investment, deep alignment with operational realities, and the ability to absorb long gestation periods.
Expressways and airports do not generate returns in twelve months. Neither do large-scale process automation systems that sit at the heart of manufacturing, supply chain, or enterprise operations. These initiatives demand a longer tenor to become commercially viable, and that tenor has to be reflected in the type of capital used to fund the builders of such systems.
This is precisely why venture capital may not be the most appropriate form of funding for B2B tech solutions providers serving the mid-market segment in India. VC capital expects acceleration and exponential returns within a relatively short window. Private equity, while a better fit for such businesses, often enters only at a more stable or mature stage.
Despite this, the opportunity remains significant. In fact, I believe that over the next five years, we will see at least 50 Indian tech services companies cross a top-line of Rs 500 crore, built entirely around serving Indian SMBs. These will be serious, high-quality firms that understand domestic business context, operate with financial prudence, and are built to last.