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In contrast to the cautious approach of domestic investors, foreign investment funds are leveraging India's growing middle class and internet-savvy population to support Indian technology startups.
Most of these startups postponed their IPO plans last year amid a stock market downturn fueled by geopolitical shifts and sharp interest rate hikes by central banks around the world. Investment funds were also hesitant 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 funds and foreign venture capital firms since the beginning of the year. According to the Prime Database, from January to August, there were 99 initial public offerings (IPOs), raising 24.52 billion rupees.
Around the same time, 22 companies listed on major exchanges raised 150.52 billion rupees. India's largest IPO this year was Mankind Pharma, worth 43.2 billion rupees ($525 million).
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Indian tech startups are attracting interest from investment funds. Photo: AP |
Foreign investment funds have increased their investments in India as they shift to emerging markets seeking lucrative returns, following a pause in central bank interest rate hikes. Startups preparing for IPOs are now hoping to capitalize on the market recovery, driven by growth rates outperforming Asian rivals like Thailand, Indonesia, and the Philippines, while China shows signs of recession. Analysts say foreign investors are enthusiastic about the growing prospects of the Indian economy . Prime Database reported that its investments in Indian equities from January to August totaled 1.35 trillion rupees.
The IPO resurgence is crucial for Indian startups and venture capital. Madhu Shalini Iyer, managing partner at VC firm Rocketship, stated: “India presents a fantastic opportunity, and interest from investors worldwide is steadily increasing. In the first half of the year, foreign portfolio investors nearly tripled their holdings 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 Jungle Ventures, assesses India as a developing market overall, with a more stable, long-term growth trend rather than a one-off surge. For international investors like Jungle Ventures (based in Singapore), India is a strategic market and a long-term bet.
Sequoia Capital expert Anandan believes that the Indian market is developing increasingly deeply and the quality of its workforce 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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