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Why investors remain bullish on India’s start-up outlook for 2022


The Paytm digital payment platform is being promoted by a Mumbai restaurant on Saturday July 17, 2021.

Dhiraj Sing | Bloomberg | Getty Images

Investors told CNBC that India’s tech start-ups would continue to draw capital from the public and private markets as they mature and grow.

A notable shift occurred in the country’s startup environment in 2021 with many high-profile businesses making their first stock market debuts. This includes food delivery apps ZomatoPayments giant PaytmAnd the parent company of online insurance aggregator Policybazaar. There is a growing number of start-ups that are being considered for IPOs, such as ride-hailing company OlaAnd Indian hotel chain Oyo.

Indian technology start-ups have also attracted record capital from venture capitalists and private equity firms. AVCJ reports that these venture capital and private equity investors invested in 779 tech deals worth $28.2B this year, which is a record amount according to AVCJ Asia, a provider of information on Asia-based venture capital intelligence providers. It was a 2000% increase in capital when compared to the $9.4billion invested last year.

CNBC’s Rajan Anandan told CNBC that Sequoia Capital India is “very bullish” on India’s tech ecosystem and ability to create long-term value.

Anandan explained that the success of businesses on international and domestic exchanges have led to increased investment interest. He said that eight portfolio companies from Sequoia Capital India made their debuts on the stock exchange in 2021.

“It has validated the fact that large companies can be built from this region — and create significant shareholder value. Anandan added that with many promising IPOs scheduled for next year we anticipate this trend to continue.”

New tech IPOs are attracting investors.

Investors have varied in their reactions to some of India’s most popular tech IPOs. Zomato shares are up 5.44% since their debut on July 23rd, while Paytm has fallen more than 13% since its November 18th debut.

Mobikwik (another digital payments company) is also available. delayed its IPOPaytm’s poor start has led to growing scrutiny. Local media reported that there is now greater scrutiny of fintech companies, and how they generate revenue, and ultimately profits.

According to Zerodha’s co-founder, Nikhil Kamath (co-founder), future IPOs will be in demand. He said that the bigger question is how these companies will fare over time.

Kamath noted that tech startups, even those which have been publicly traded, are still overvalued.

“Majority these” [companies]”They aren’t profitable, and it doesn’t seem like they’ll be in the next four to five years,” he stated.

When looking at a start-up, investors should separate the company’s valuation — which is determined by the public market — and its fundamentals, according to Sandeep Naik, head of India and Southeast Asia at global investment firm General Atlantic.

CNBC’s “Street Signs AsiaNaik, an early-stage investor and a growth-stage investor said earlier this month that India has made large sums of money in recent years. Exits were partly to blame for that, Naik said. They allowed additional capital to be pumped into India’s technology ecosystem, and also helped startups grow.

Exit is when a founder sells his start-up or makes it public via an IPO.

Zomato food delivery partners in Kolkata, India.

Debarchan Chaterjee | NurPhoto | Getty Images

Naik explained that in the last 18 to 24-months you have witnessed the increase in IPOs and companies in the IPO queue, as well as the manner in which companies traded. This gives you a strong validation that international capital markets see our region in a favorable position to invest in economic growth.

What’s next?

Although start-ups will continue to attract capital, growth and fundraising may be slower in 2022.

According to Amit Anand (founding partner of Jungle Ventures), there was lots of demand for funding rounds in 2020 that had been scheduled but postponed due to the Covid-19 pandemic.

CNBC’s Byron said, “If I add all the fundraisings from this year and possibly spread them across 2020 and/2021, the picture will be different.”

Anand said that the image still depicts India as a developing market. However, it points to steady, long-term growth year-on–year instead of an epoch. He explained to Jungle Ventures, an international investor based in Singapore that India was a strategic market. They place bets for the long term.