VC investment in India softens across all verticals except fintech: KPMG
- At the end of September, the value of VC deals was $2.7 billion.
- This quarter’s VC deal value is much lower than Q3 2021, which peaked at $15.9 billion.
Fintech investment continued to buck the trend as seen in many large deals, saysKPMG .- Globally,
VC investment fell to a low level not seen since the second quarter of 2020. - KPMG expects these challenges to continue in the fourth quarter, and it will also take longer to close deals.
For the June-September quarter of this year, the total deal value of VC investments was $2.7 billion. This is significantly lower than what it was in the same period last year at 15.9 billion dollars. However, deal values peaked in Q3 2021 and have been falling since then. But the deal value for the third quarter of 2022 fell sharply on a sequential basis as well – from the second quarter’s $7.4 billion.
Still, there is a silver lining. “VC investment in India has softened this quarter across most industry verticals. However, fintech investments continued to buck this trend and received significant investor attention, as evidenced by the number of large deals,” said Nitish Poddar, partner and country head of private equity at KPMG India.
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The biggest deal in the quarter was a $210 million investment in edtech UpGrad, and a $165 million investment in eyewear company Lenskart.
Neo-banking platform Niyo raised $130 million during the quarter. “Fintech was one of the most attractive investment sectors in India this quarter. In addition to Niyo, online car insurer InsuranceDekho raised $100 million and digital lending company EarlySalary raised $97 million,” the report said.
Despite the slowdown, India is one of the few countries where VC activity remains resilient along with China and Japan, the report said.
Each region had at least one mega deal over $1 billion
Globally, VC investment fell to a low level not seen since the second quarter of 2020 – in the middle of the pandemic. This despite mega deals in all regions such as $1.9 billion raised by SpaceX in the US, $1.4 billion raised by Celonis in Germany and $1.2 billion raised by Sunwoda EVB of China.
Total VC funding for the quarter was $87 billion for the third quarter globally, down sharply from $136 billion in the second quarter. On a year-over-year comparison, the drop is even higher from $190 billion in Q3 2021.
This quarter also saw many down rounds where funds were raised at lower valuations, the report says.
“Companies that have high valuations will have to work hard to keep them. On the positive side, there is a lot of dry powder in the market. The strong companies and the resilient ones will continue to attract funding and they will prosper,” said Jonathan Lavender, global head for KPMG.
According to the report, the energy, healthcare and biotech sectors continued to witness good VC activity, while consumer-focused companies lost traction due to high inflation, interest rates and strengthening arguments for a global recession.
KPMG also expects these challenges to continue in the fourth quarter. “Deals will take more time to complete as investors conduct robust due diligence, particularly on forecasts. While the IPO door is expected to remain closed, there could be an upswing in M&A activity as companies consider alternative exit plans,” the report said.
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