“The question isn’t whether circular enterprises can succeed, but whether financial systems will evolve quickly enough to support them.”
The circular economy transition is accelerating across India, with startups developing innovative solutions in waste management, plastics, e-waste, and batteries. However, scaling remains challenging due to fragmented value chains, inconsistent regulation, and financing gaps. Drawing on insights from Villgro’s SAAF Cities report and ANDE’s Investment Guides, this analysis examines the financial barriers and opportunities shaping circularity’s growth.
Early-Stage Risk Capital and De-Risking Mechanisms
Circular enterprises rely on early-stage grant funding and concessional loans to test unproven models. Yet both reports highlight a persistent “missing middle”, ventures that have progressed beyond seed funding but are not yet ready for debt. Tools such as First Loss Default Guarantees (FLDGs) and innovative working capital solutions can de-risk lending to these enterprises, building investor confidence. Aggregation models, where plastic recyclers collaborate across cities or EV battery handlers offer integrated services, also present stronger financing cases than fragmented operators.
Misaligned Risk Assessment and Market Volatility
Lenders assess enterprises not just by assets owned, but by business model maturity and customer stability. Two enterprises operating identical equipment may be perceived differently as a recycler with secured contracts appears more creditworthy than a social enterprise with unpredictable revenue streams. This reveals a financing gap: asset creditworthiness depends on use-case and market anchoring, not inherent value.
Most financing models focus on collection and sorting assets, overlooking post-processing market volatility. Prices for recovered lithium or recycled plastics can swing dramatically, impacting cash flow. Finance must evolve from linear product thinking to circular value risk models that account for downstream volatility.
Data Asymmetry and Cash Flow Mismatches
For many circular enterprises, the biggest financing barrier isn’t performance but data opacity. Without standardized information on waste generation, recovery, and processing, lenders struggle with risk assessment, resulting in overpriced or denied credit. Building shared data infrastructure could unlock fairer lending terms and greater investor confidence.
Circular enterprises rarely operate on predictable cash flows, depending instead on long inventory cycles, delayed government payments, or batch production. Yet financing instruments assume fixed, linear repayment schedules. The solution lies in flexible instruments like revenue-based finance or milestone-linked disbursements that align with circular business cash cycles.
Institutional Maturity Gaps
Technology innovation often outpaces institutional maturity. While startups develop scalable technologies like digital traceability tools, many lack basics in compliance, legal structuring, and municipal contracting, leaving them unprepared for government procurement. Similarly, innovation pilots often falter because municipal units lack capacity to absorb and scale solutions, even when startups are strong.
This dual challenge requires building institutional scaffolding, governance, compliance, and contracting capabilities, alongside tech readiness at the enterprise level, while strengthening city capacity to integrate innovations into existing systems.
Moving Forward: Building an Enabling Financial Ecosystem
The path to scaling circular enterprises requires a fundamental reimagining of how we approach finance in this sector. Success will depend on three critical shifts: developing financing instruments that match the cyclical nature of circular business models, building robust data infrastructure to reduce information asymmetries, and strengthening institutional capacity at both enterprise and government levels.
The circular economy’s potential cannot be unlocked through innovation alone. It requires financial tools that understand and accommodate the unique characteristics of circular value chains.
To dive deeper into the findings and insights, you access ANDE’s Investing in the Waste and Circularity Sector in India: An Introductory Guide, Waste and Circularity Sectoral Deep Dives, and Villgro’s SAAF Cities report.
SAAF Cities is a joint initiative by HDFC Bank and Villgro Innovations Foundation, designed to bring together innovators, Urban Local Bodies (ULBs), and corporates to accelerate the adoption of climate-smart waste management solutions.
This landscape guide is intended to outline India’s current context in recycling and circularity, with a focus on the investment potential, opportunities and business models in the ten most significant waste streams in India. It provides a framework for how investment potential in a waste stream can be determined, which covers five areas that define that potential: market size and growth; investable start-up pipeline; product readiness; policy support; financing needs and gaps. The guide also includes a historical outline of investments and funding in each waste stream and outlines the roles and participation of various types of equity funders, along with the potential and participation of non-dilutive funding options.
India grapples with a substantial plastic waste challenge. In 2021, according to government data, the country generated nearly 26,000 tonnes of plastic waste daily, amounting to approximately 4.1 million tonnes over the year. However, other estimates state that the actual figures are more than double, with an estimate from a recent Nature paper, stating that India generated 9.3 million tonnes of plastic waste in 2023. A significant portion of that waste, approximately 75%, consists of three primary polymers: polypropylene (PP), polyethylene (PE) and polyvinyl chloride (PVC), with the remainder coming from other polymers such as polystyrene (PS), high-density polyethylene (HDPE), low-density polyethylene (LDPE), and polyethylene terephthalate (PET). The key opportunities for plastic circularity in India are emerging around enabling higher-quality recycled outputs, packaging solutions and circularity in traditionally hard-to-recycle segments, such as flexible and multilayer plastics. These cascade into specific opportunity areas across the value chain, which are summarized in this report
This guide focuses on the management and handling of municipal solid waste (MSW) from its initial collection to how it is processed and dealt with at landfills and dumpsites. It also covers some solid wastes with lower-value recycling potential or volumes, e.g., biomedical waste, paper waste, and base metals from non-electronic waste sources, such as aluminium and copper. Managing the close to 60 million tonnes of MSW that India generates annually is a daunting challenge. 90% of that waste is apparently collected but lower levels of processing – around 50% – show a significant amount is either not processed or remains unaccounted for, highlighting inefficiencies in waste management systems. Projections indicate a staggering increase in MSW generation, nearly tripling to 165 million tonnes by 2031. There are significant opportunities to improve waste processing and resource recovery in India’s MSW sector through decentralization, automation, and logistical improvements.
India is a significant player in the global e-waste landscape, contributing approximately 4.1 million tonnes of electronic waste (e-waste) in 2022, which accounts for approximately 7% of the world's total e-waste output. In 2021, one-third of India's e-waste was managed through formal and informal channels, with 80 to 90% of e-waste management operations handled by the informal sector. By 2030, India's e-waste output is expected to escalate significantly, reaching approximately 9 million tonnes (based on our estimates), which would represent about 11% of the global e-waste forecast for that year (82 million tonnes). India’s e-waste and LiB recycling sector offers multiple avenues to create value through innovative business models. The key opportunities range across advanced metal and rare earth extraction, integrated recycling, interim recycling for high-demand metals, second-life electronics and batteries. These cascade into specific opportunity areas across the value chain, which are summarized in this report.
India presents significant opportunities for new businesses to create value by leveraging agricultural, food and biomass waste. Agricultural biomass, which primarily consists of post-harvest crop residue and waste from livestock, is the largest source of waste in India – the country generates approximately 350 million tonnes annually. Agricultural and biomass waste generation is also expected to increase as food production increases, especially for staple and cash crops like rice, wheat, maize and cotton. Biomass is used in diverse applications from fodder for cattle and household cooking to the production of biogas, manure and renewable fuels such as bioethanol and biodiesel.
Biomass caters to a substantial portion of India’s rural energy demand, fulfilling approximately 80% of it. Low-cost biomass solutions play a particularly significant role in rural settings, where small-scale energy needs predominate. Conversely, more sophisticated biomass technologies are used in applications such as energy generation or fuel production, especially for large-scale operations. These opportunities relate to improved collection, waste-to-energy solutions, and diverse biomaterials.