The market capitalisation of these firms, including Zomato, Paytm, Justdial, Five Star Business Finance amd Nazara Technologies, has crossed $50 billion, as per a report by the VC company.
“As we’ve continued monitoring and diving into the Indian VC ecosystem, one of our investment indicators, “Total Market Capitalization of VC-Backed Companies Public in India,” crossed $50B,” Sethi wrote in a LinkedIn post.
“We also believe this remarkable achievement hasn’t caused global VCs to reconsider India’s potential. The share of global VC investment into India was 5.5% in 2019, when VC-backed Indian public companies held only $4.9B market capitalisation. That share shrank to 4.7% in 2021 and is 3.3% for 2023,” he noted.
Notably, the aggregate market capitalisation of these firms had crossed $60 billion in 2021, when both public and private investment markets were booming, and a number of these companies did their initial public offerings (IPO). Thereafter, the valuations started correcting as central banks across the world began raising interest rates to curb supply of money, and investors started taking their foot off the gas pedal.
Sethi’s comments come days after impact investment firm Omidyar Network – backed by Ebay founder Pierre Omidyar – said it would stop making any new investments in India. Earlier this year, Sequoia Capital also exited India with the multi-stage venture capital firm’s India and southeast Asia partnership being split and rebranded as Peak XV Partners.
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“At Tribe Capital, when we invested in Shiprocket, Khatabook, Blackbuck and others, the pushback from the talking heads was that India is a large, exciting market, but there weren’t any exits. And they were correct; there were under $5 billion of enterprise value in public markets from VC markets in India at the time,” he wrote.“But of course, the same thing could have been said about China, and if you had the opportunity to invest in Tencent, and passed because of liquidity concerns, you would have felt pretty dumb about it in the end,” he added.
Sethi has cited the market capitalisations of 20 venture-backed companies that have gone public. These are Onmobile Global, Persistent Systems, Justdial, Tejas Networks, Matrimony.com, Prataap Snacks, Newgen Software Technologies, CreditAccess Grameen, Indiamart, Happiest Minds Technologies, Stovekraft, Nazara Technologies, Zomato, Vijaya Diagnostic Centre, Nykaa, Paytm, PB Fintech, MapmyIndia, Delhivery and Five Star Business Finance.
Global investors selling
Indian public markets have been scaling new all-time highs recently with the 30-stock benchmark index Sensex crossing the 70,000-mark for the first time earlier this week. Meanwhile, several new-age stocks such as Zomato and Nykaa have also touched 52-week high levels in recent months.
As the broader markets continue an upswing, global investors in some venture-backed companies have been booking exits from these stocks. Most recently, SoftBank offloaded shares worth Rs 1,125 crore in food delivery platform Zomato last Friday, making a full exit from the company.
Apart from Zomato, SoftBank, which was one of the earliest investors in India’s new-age companies, is also seen exiting other companies.
In November, it sold about 1.8 crore shares in Delhivery. The investor also gave up a 2.5% stake in PB Fintech in October. A few months earlier, it offloaded its stake in Paytm.
On December 8, ET reported that private equity firm TPG and venture investors Matrix Partners and Peak XV Partners were looking to divest up to 8.81% in non-banking finance company Five Star Business Finance for up to Rs 1,876 crore.
In private investment markets, however, a slowdown has persisted. ET reported on December 9 that funding to Indian startups fell steeply in calendar year 2023 to $7 billion – becoming less than a third of the estimated $25 billion received in the previous year, citing industry data. This marked a seven-year nadir for the ecosystem since 2017, amid a worsening global macroeconomic environment buffeted by geopolitical conflicts.
ETtechPointing to a deepening of the ‘funding winter,’ equity investments received by new-age ventures in the fourth quarter of 2023 were the lowest since the dismal showing in the third quarter of 2016, data from research platform Tracxn, as of December 5, showed.
