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In contrast to the caution of domestic investors, foreign equity funds are leveraging India's growing middle class and internet-savvy population to back Indian tech startups.
Most of these startups postponed their listing plans last year, amid a stock market downturn due to geopolitical changes and sharp interest rate hikes by central banks around the world. Investment funds were also reluctant to invest in loss-making listed technology companies.
However, according to Nikkei Asia, Indian tech startups have raised a record amount of capital from private equity and foreign venture capital firms since the beginning of the year. According to data platform Prime Database, there were 99 initial public offerings (IPOs) between January and August, raising 24.52 billion rupees.
And in the same period, 22 companies listed on major bourses raised 150.52 billion rupees. India’s biggest IPO this year was Mankind Pharma’s 43.2 billion rupee ($525 million).
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Indian technology startups receive attention from investment funds. Photo: AP |
Foreign funds have increased their investments in India as they turn to emerging markets in search of lucrative returns after central banks paused interest rate hikes. And start-ups preparing for initial public offerings are hoping to capitalize on a market recovery as growth outpaces Asian rivals such as Thailand, Indonesia and the Philippines, while China shows signs of slipping into recession. Foreign investors are excited by the growing prospects of the Indian economy, analysts say. Their investments in Indian stocks between January and August totaled 1.35 trillion rupees, according to Prime Database.
The IPO revival is important for Indian startups and venture capital. “India is a great opportunity and there is growing interest from investors across the world,” said Madhu Shalini Iyer, managing partner at VC firm Rocketship. Over the first half of the year, foreign portfolio investors nearly tripled their stakes in three startups and now hold 33.3% of food delivery tech service Zomato, 22.7% of logistics company Delhivery and 16.8% of fintech provider Paytm.
Amit Anand, founding partner at venture capital firm Jungle Ventures, said that India is a growing market overall, with a more stable, long-term growth trend rather than a one-off spike. For international investors like Singapore-based Jungle Ventures, India is a strategic market and a long-term bet.
Sequoia Capital expert Anandan said that India's market is growing deeper and the quality of human resources is also improving. The Covid-19 pandemic has accelerated the adoption of technology, leading to many startups growing faster than before. It is predicted that startups will continue to attract new capital in 2023.
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