The big PE, VC deal flow in Indian internet ventures: $8b in last fiscal, $7b in April to September 2018

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New Delhi | Published: October 8, 2018 5:30:59 AM

Private equity firms and venture capitalists invested a chunky $7 billion into online ventures between January and September, data sourced from research agency Tracxn showed.

Private Internet companies have done well for themselves picking up over billion, estimates by Jefferies say.

India’s online environment is thriving. Private equity firms and venture capitalists invested a chunky $7 billion into online ventures between January and September, data sourced from research agency Tracxn showed. That may be a little less than the $8 billion they bet during this time last year but it’s nonetheless impressive.

Private Internet companies have done well for themselves picking up over $6 billion, estimates by Jefferies say. Of this, over a third of the investments or $2.4 billion flowed in during the September quarter alone.

As many as 13 companies have attracted over $100 million this year — including Bigbasket, Oyo, Swiggy, Zomato, Paytm, Policybazaar and Byjus. SoftBank and Chinese companies such as Alibaba, Tencent and Meituan continue to lead the investments. The event of the year, of course, was the $16-billion acquisition of home-grown player Flipkart by US-based retail giant Walmart. That seems to have triggered a fresh wave of investments.

Sreedhar Prasad, partner, KPMG, says there’s continued interest in Indian online businesses with consumer-centric companies and deep technology outfits attracting a fair amount of money.
The confidence of investors in Internet businesses stems from several factors.

Although recent surveys have shown that many shoppers have stopped buying online, the universe of consumers making purchases on the Internet is growing. It’s not just shopping sites that are popular but also food delivery and other services. The total number of shoppers this festive season is tipped to jump to 20 million from 14 million last year. RedSeer Consulting believes that consumers from several of India’s smaller cities, especially Tier II towns, will participate in the purchase. “The festive season sale is an important tool used by e-commerce companies to add new customers,” Ujjwal Chaudhry, engagement manager, RedSeer Consulting, said.

RedSeer Consulting predicts that between them the top two e-commerce players — Amazon and Flipkart — will clock a gross merchandise value (GMV) of around $2.5-3 billion over the five-day festive season sale. This is a jump of almost 67-100% in GMV against the year ago, when the two together had reported a GMV of $1.5 billion.

The big increase in number of smartphone users is also driving the growth of internet businesses. Research firm eMarketer estimates the number of smartphone users in India will to grow 15.6% to 337 million by end of CY2018 and 490.9 million by end of CY2022. At the end of CY2017, the total number of smartphone users stood at 291.6 million.

To be sure, investments in early stage rounds have nearly halved. Angel investments, for instance, were just $44 million. Mid-level rounds such as Series B posted a 9% decline in funds received to $854 million. However, PEs topped up their investments by 25% to $86 million. Mature Series C rounds reported a 261% jump in investment to $1.64 billion. As Jinesh Shah, founding partner at Omnivore Partners, pointed out too many clones are making investors cautious. “This is one reason why only a handful of businesses continue to get funds,” Shah added.

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