Real India Opportunity is in Serving Growing Middle Class, Says Stewart Langdon of LeapFrog Investments

Every year, millions of Indians are moving from poverty to the middle class, and are thereby increasing demand for credit and healthcare. Combined with underserved markets, this presents tremendous growth opportunities, says Stewart Langdon, partner and co-head of South Asian investments at LeapFrog Investments, a London-based impact investment firm.

Langdon says LeapFrog expects income levels in India to keep rising, leading to a growing consumer base. While many companies tend to focus on wealthier consumers, the real opportunity lies in serving those transitioning into the middle class, he adds. Having initiated investments in India back in 2008, Langdon says now there is a heightened emphasis on climate concerns and developing solar and electric vehicles presents an attractive opportunity. 

He further says the technological landscape is evolving rapidly, particularly with the increasing integration of artificial intelligence and with a robust infrastructure in place, there is immense potential to leverage big data and machine learning to enhance customer experiences and capabilities. 

Aligning Profit with Purpose

Langdon says that for LeapFrog the foremost consideration is in aligning profit with purpose. “We prioritise growth in regions like India, which offer immense potential for expansion on both macro and micro levels. India’s landscape is rich with enterprises making significant strides in poverty reduction through initiatives like micro-lending and accessible healthcare,” he says.  

“Geographically, we target high-growth markets such as India, Southeast Asia [including Vietnam, Philippines and Indonesia], and sub-Saharan Africa. These regions represent the epicenter of growth for the next couple of decades,” says Langdon. 

LeapFrog Investments as a company emphasises on governance standards, says Langdon. Consequently, initial investments of the firm were predominantly targeted at established family-run businesses such as Mahindra, and Sriram, all helmed by successful promoters. “However, the emergence of smartphones and digital infrastructure [have] catalysed the rapid rise of technology-driven enterprises,” he says. 

Langdon says that as a trustee of the Asia Scotland Institute and former chair of its business advisory council, he has been involved in initiatives that highlight the significant opportunities and challenges India presents. “I believe India remains a crucial focus for international business endeavours. India’s emergence as a key player in the 21st century underscores the importance of nurturing relationships and trading corridors between India and the UK, particularly post-Brexit,” he says. 

He states that in India, their investment approach prioritises promoting financial inclusion and addressing social impact. This involves supporting initiatives such as microfinance entities, small finance banks, and health insurance providers catering to low-income demographics. Additionally, their new climate strategy emphasises investing in green solutions to combat climate change, aligning with India's imperative to achieve net-zero emissions sooner rather than later. 

“Considering India’s projected status as the world’s third-largest economy by 2027 and the nation’s vulnerability to climate-related challenges, investing for impact is crucial. Our focus extends beyond ESG compliance to actively seek investments that drive positive change in poverty alleviation and environmental sustainability,” he informs.  

Langdon says proficiency in technology is important for sustainable impact and whether investing in traditional or cutting-edge businesses, a strong technological foundation is indispensable for maximising LeapFrog Investments’ societal contributions. He adds that the company has supported numerous entrepreneurs in insurance and payment sectors embracing both traditional and innovative business models. 

The core of LeapFrog Investments strategy is focussed on tapping into the rapidly growing demography of emerging consumers in Asia and Africa, Langdon says, adding that the climate-conscious trend has amplified opportunities particularly in the renewable energy sector. Affordable alternatives like rooftop solar systems are gaining traction, necessitating financial services to facilitate their wider adoption, he says further.   

Navigating Investment Strategies 

According to Langdon, LeapFrog Investments’ sectoral focus revolves around what one terms ‘essential services’. These primarily encompass financial services, healthcare, and now climate-related ventures. The core strategy involves identifying companies that are well-positioned to capitalise on Asia and Africa’s growing consumer base that is emerging from poverty and transitioning into the middle class. 

In his current role at LeapFrog Investments, Langdon specialises exclusively in financial services, while his colleagues focus on healthcare and climate-related sectors. “This specialisation is crucial,” Langdon says, because the sectors LeapFrog deals with are incredibly complex. “By dedicating our expertise to specific areas such as financial services, we develop deep knowledge in areas like credit and insurance,” he says. 

The specialisation also helps Langdon and other members of LeapFrog to communicate effectively with entrepreneurs and promoters, as they understand their language and provide insights based on patterns that they have observed, he says. He adds that the company strategically hires individuals with operational experience within the sectors they specialise in. “This brings a level of expertise and understanding that sets us apart from other digital private equity funds,” he says. 

For aspiring finance and private equity professionals, Langdon’s advice is that they must understand that finance today is not the same as it used to be. “The world has shifted dramatically, India, for instance, has ascended in global rankings, altering the economic dynamics significantly,” he says. He adds that finance today holds the power to drive meaningful change in the world. Langdon says aspiring professionals should embrace the opportunities presented by sectors like Environment, Social and Governance (ESG) and climate-focussed investing.    

Driving Tangible Impact

Langdon says that in its approach to supporting portfolio companies like Zepz—a digital cross-border remittance business—LeapFrog Investments has gone beyond traditional private equity strategies. “While we certainly contribute at the board level and assist with strategic planning, our unique strength lies in our operational capabilities,” he says. 

Langdon gives the example of BIMA—an insurance-tech company. “When we initially invested in BIMA, it primarily offered life insurance with no experience in health insurance. Recognising the potential to expand its offerings, we deployed our expertise. With a team of actuaries, including specialists in healthcare, we collaborated closely with BIMA to develop a health insurance product, he adds. 

He says LeapFrog Investments even secured grant funding to facilitate this development process. As a result, BIMA successfully launched its health insurance product which now benefits approximately 7.4 million people across Ghana, Tanzania, Pakistan, Bangladesh and beyond. “This hands-on approach sets us apart from other funds, as we actively engage in designing and distributing our products that have a significant, positive impact on communities,” he points out.