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Business News/ News / India's investors turn to familiar risks amid economic uncertainties
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India's investors turn to familiar risks amid economic uncertainties

Against the backdrop of broader economic concerns, Indian investors are looking at trusted areas, with a focus on mitigating risks, industry leaders emphasized at the Mint India Investment Summit 2024

Ashish Kotecha, Partner, @BainCapital; Vishesh Shrivastav, MD, @Temasek Holdings, India; Deepak Dara, Senior MD and Head of India, @OTPPinfo; Nithya Easwaran, MD, @MultiplesPE; Nishant Sharma, Managing Partner, Kedaara Capital.Premium
Ashish Kotecha, Partner, @BainCapital; Vishesh Shrivastav, MD, @Temasek Holdings, India; Deepak Dara, Senior MD and Head of India, @OTPPinfo; Nithya Easwaran, MD, @MultiplesPE; Nishant Sharma, Managing Partner, Kedaara Capital.

Indian investors will likely gravitate towards familiar sectors with lower risks, as looming macroeconomic uncertainties and geopolitical tensions have curbed funding appetite, senior industry experts said in a panel discussion at the Mint India Investment Summit in Mumbai.

"We will focus on familiar risks this year and remain disciplined on valuation and risk rewards," private equity firm Kedaara Capital's managing partner Nishant Sharma said, adding that private capital markets look quite "robust" this year. 

Kedaara Capital's portfolio includes startups such as eyewear retailer Lenskart, beauty & personal care brand Purrple, and Saas-based fintech platform Perfios.

Ontario Teachers’ Pension Plan's senior managing director and head of India - Deepak Dara also stressed the importance of selective investment, "We take allocation to markets where we see the most value," emphasizing a long-term bullish perspective on India.

Rising interest rates and broader economic concerns have dampened investor sentiment, significantly reducing the funding available to startups from the peak levels experienced during the pandemic. Consequently, investors are now more discerning, focusing their investments on companies that demonstrate a clear trajectory towards profitability.

With scattered growth across sectors, startups and bigger companies alike have been challenged with identifying growth opportunities. However, investors remain bullish on opportunities in India.

"From a strategy perspective, it is an interesting time. Despite growth being here and there, valuations have been strong and there is a lot of dry powder. Today, we are seeing many Asia funds increasing their allocation from 10-15% to over 30%," private equity fund Multiples Alternate Asset Management's managing director Nithya Easwaran said. Last year, the company raised $640 million for its fourth Indian-focused private equity fund.

Easwaran added that the private equity fund has diversified its areas of interest to also add newer emerging themes such as the green economy that revolves around sustainable mobility and are actively looking more into this space.

The increased scrutiny on startups' business models, especially those that expanded rapidly with pandemic funding, has prompted investors to intensify their due diligence. 

Vishesh Shrivastav of Temasek Holdings emphasized the critical nature of this process, "It is extremely important to do your due diligence to make sure governance standards are as you expect."

"While the environment looks conducive, that's no excuse to not do the hard work. Historically, the markets are promising only when you follow these tenets. The opportunity is immense but you need to be careful about these things," Shrivastav added.

Ashish Kotecha from Bain Capital discussed the evolving definition of governance, pointing out the necessity of considering factors like environmental, social, and governance (ESG) and ensuring diversity. Bain Capital focuses on active ownership and deep global collaboration to understand market trends, "This helps us in the valuation creation journey," Kotecha said.

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Published: 30 Mar 2024, 03:25 PM IST
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