Market Today Summit: ‘We’re probably seeing the last leg of the funding winter’, say experts

Enough has been said about the global capital market slowdown of 2022. While India remains one of the better positioned economies — vis-a-vis the West, China, and parts of Europe —it hasn’t been entirely unaffected either. Global VC and PE funding into the country dropped by 35 per cent last year; several new-age companies withdrew their IPOs, and so on. 

Despite this, investors are filled with cautious optimism, and consider India to be a shining beacon for the world. 

At Business Today’s inaugural Market Today Summit in Mumbai on Tuesday, Manisha Girotra, CEO, Moelis India, told BT Editor Sourav Majumdar, “We are probably seeing the last leg of the funding winter. India is the only market globally that is showing growth. With rural demand coming back and inflation going down, we will see more deployment of capital in the second half of the year.”

China re-opening after its Covid-induced lockdowns is also good news for India. “With global supply chains opening up, India’s exports will improve too. A lot of sovereign wealth funds and pension funds are now seeing the depth of the Indian market. We will come out winners in the long term,” Girotra added. 

While the growing interest of wealth funds is a definite positive for the country, traditional VCs are also hoping for the tide to turn in 2023.  

Sanjay Mehta, Founder & Partner, 100X.VC (an early-stage fund), said, “There are always excesses in the market and then it rationalizes and comes back to normal. It is a continuous cycle. These are the times when the next giants of India will be born, new unicorns will be germinated. This is the time when companies can get good talent at a great value. Customer acquisition costs are also down. So,  in every aspect, this is a great time to build a company and invest across sectors.”

“From a fundraising perspective, the euphoria has mellowed down but investing continues,” he stated. 

While traditional investor-favourites like IT, IT services and consumer brands continue to see good deal momentum, experts reckon sectors like EVs, renewable energy, D2C, infrastructure, generative AI, Web3, and so on will also become ‘hot’ in 2023. 

Girotra shared, “The Canadian and Middle Eastern wealth funds are getting into infrastructure, roads, EVs, investments, and not just into consumer segments where exits are easy. The pension funds have bought into many of the IPOs. Canada Pension Plan Investment Board (CPPIB) took a large stake in ReNew Power. So, in renewables and EVs, deployment of capital has continued.”

Given the public markets’ lukewarm response to several tech IPOs last year, investors are likely to focus more on a company’s cash flows, and its path to profitability. “There was free money floating around the world earlier. Now, capital is following real businesses and growth. It won’t follow anywhere,” Girotra added. 

Also read: Market Today Summit: 'In India, everyone looking at new-age tech firms with a different lens,' says 100X.VC's Sanjay Mehta

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