PE-VC inflows double in Aug

Startups In Focus

♦ Sovereign wealth funds from Gulf nations setting up shop in India

♦ SWFs increasing their exposure to Indian startups

♦ Medium to long-term outlook remains positive for Indian startup sector

♦ However, startups facing current short-term issues of tepid growth and governance troubles

Venture capital (VC) and private equity (PE) funds’ investments increased to $5.2 billion across 67 deals in August, a report said on Wednesday. The investments are more than double of the $2.3 billion witnessed in August 2022, even though the number of transactions has declined from 32 in the year-ago period, as per the monthly report by industry lobby grouping Indian Private Equity and Venture Capital Association (IVCA) and consultancy firm EY.

The consultancy firm’s partner Vivek Soni said funds are skeptical as growth remains elusive for many startups and valuations remain high.

“With many sovereign wealth funds, especially from the Gulf nations, setting up shop in India and also increasing their exposure to Indian startups, the medium to long-term outlook remains positive for the Indian startup sector despite the current short-term issues of tepid growth and governance troubles at some startups,” he said.

There were 13 large deals of more than $100 million each, aggregating to $4.5 billion in August, which is a 416 per cent jump from the same in the year-ago period. Fourteen deals involving investments of $2.4 billion were classified as growth investments as compared to just $176 million in nine deals in August 2022.

Startup investments declined by 62 per cent to $387 million across 27 deals in August 2023 as compared to $1 billion across 63 deals in August 2022, the report said. Infrastructure emerged as the top sector in August 2023, on the back of the large investment by GQG Partners Inc in Adani Power Limited, recording $1.8 billion in PE/VC investments across six deals. It was followed by retail and consumer products sector, which saw $1 billion in four deals. August 2023 recorded 37 exits worth $4.3 billion, the highest value of exits in 22 months, compared to $3.2 billion recorded in August 2022 across 28 deals. PE/VC funds raised $1.5 billion compared to $583 million in August 2022, as per the report.