Even though India has one of the biggest startup scenes in the world, values have dropped sharply for a number of businesses that have had difficulty expanding as investors have become more demanding.
Family Office Warns Discounts
Because of significant discounts caused by funds that need to sell their assets, the family office of tech billionaire Narayana Murthy is becoming more wary about Indian companies.
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In an interview, Deepak Padaki, president of Catamaran Ventures LLP, said that mediocre firms that are having trouble growing and do not have a clear route to profitability or are not making much progress are being sold at discounts of 30–40%.
Investors Seek Quick Exits
Because their fund periods are coming to an end, “funds that invested in these firms want to sell their interests,” he said. “We do not have the capacity to take on businesses that need substantial hand-holding for a turnaround, but there may be chances for private equity or secondary funds.”
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“Rishi Sunak’s father-in-law, the founder of Infosys Ltd., holds $1.3 billion through Catamaran, one of India’s largest private investment firms.”
Oyo Valuation Faces Decline
SoftBank Group Corp.-backed Oyo Hotels, for instance, was previously one of the most valuable companies in India, with a $10 billion valuation in 2019. However, fierce competition has lowered its profitability and value. Although it has subsequently recovered, it has repeatedly postponed listing on the public exchange.
During the epidemic, venture capital and growth transactions in India increased dramatically, reaching a high of $38.5 billion in 2021, according to Bain & Co. Despite a subsequent decline in interest, agreements remain above pre-pandemic levels, with a minor recovery in 2024 to reach $13.7 billion. This demonstrates how ultra-high net worth individuals, venture capital firms, and family offices in India still provide funding to start-up businesses and their founders.
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Catamaran Shifts To Manufacturing
Among those advising caution is Catamaran. Since the beginning of 2024, it has only made investments in two businesses, claiming that the prices for successful startups with rapid development are excessive. However, Catamaran claims that agreements for minority shares with little control are no longer alluring.
While the bulk of its portfolio is in public markets and a few tech firms, it is now changing course to invest in manufacturing. SpaceX as well as National Stock Exchange of India Ltd. are among its assets.
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India Pushes Domestic Manufacturing
As India attempts to increase domestic manufacturing and establish itself as an export powerhouse, the family office has recently started to concentrate on businesses operating in certain supply chains, such as aircraft, electric cars, electronics, and maybe medical devices in the future. The company is looking for small and medium-sized businesses who want to expand but only have one or two plants.
Although the impact of AI on the manufacturing sector would not be seen for some time, Padaki said that India has a limited opportunity to capitalize on the industrial interest, particularly given its cost advantage that could go as automation becomes more commonplace.
“Manufacturing fits perfectly with what we want to achieve as a family office with the opportunity to invest additional patient cash,” he said.