Private Equity firms invest $17.6 billion in Indian startups

Mumbai: Private Equity firms have invested about $17.6 billion in Indian companies in the first 9 months of 2017 – sailing past the previous high of $17.3 billion recorded in CY15 with sectors such as internet, infrastructure and IT services attracting a major chunk of the inflows.

According to Venture Intelligence, 2017 has already recorded as many as 21 deals, each valuing over $200 million in size in addition to 15 deals between $100 million and $200 million.

The mega deals have been dominated by four sectors: Internet & mobile, Infrastructure, IT Services, BPO and BFSI (Banking, Financial Services and Insurance).

Over $4 billion accounting for 24 per cent of the total investment value has been committed by just one technology focused investor — Japan-based SoftBank. Its investments included $250 million in budget hotels aggregator OYO, $1.4 billion in mobile wallet leader Paytm and a whopping $2.5 billion in ecommerce firm Flipkart.

The record breaking value figures have however been accompanied by a fall in number of deals as venture capital investments in early stage companies have remained tepid amidst concerns regarding their business models and valuations. The number of deals in the first nine months of 2017 (at 402) is 23 per cent lower than the number of deals in 2016 and 35 lower compared to the same period in 2015).

“The private equity investments have largely flown into growth stage companies in just 3-4 sectors which are looking quite attractive at this point of time. This is one of the reasons behind the increase in deal value. However, the number of deals has come down largely because of lack of interest shown by venture capital investors in early stage companies. It is generally this segment that accounts for the maximum number of transaction,” said Arun Natarajan, CEO, Venture Intelligence.

In 2015, there was a significant increase in the number of deals especially in the consumer e-commerce space.

“However, there was a major shake out in the business-to-customer e-commerce segment in 2016 as their unit economics or business models came under heavy scrutiny from investors,” he added.  

Since venture capital funds have raised significant amount of capital in recent months, Mr Natarajan believes they would soon deploy those funds in some early stage companies.

“Fintech companies are showing good potential. It is likely to replace e-commerce sector in attracting private equity or venture capital investments in the coming months,” he added.