The Indian Venture Capital market was “quite strong” in the fourth quarter of 2019, ending the year on a high note with many large mega deals, according to a study by KPMG.

The mega-deals included a $1-billion funding round by PayTM and a $500-million round by business productivity company Udaan. Besides, online pharmacy company PharmEasy raised $220 million, while home furnishings company Urban Ladder raised $148 million.

Consumer-focused technologies were the focus for VC investors in India, while Fintech continued to be one of the strongest sectors of VC investment in Q4’19. This trend is expected to continue for the foreseeable future given the country’s significant rural and unbanked population and the complexities and challenges associated with building a traditional financial services company in the country, it added.

Foreign investors remained quite active and interested in making investments in India. During Q4’19, Silicon Valley-based Accel closed a $550-million fund, its sixth India-focused VC fund.

India has also seen an increase in VC investments by Japan’s trading houses.

“VC investment in India was relatively mixed during 2019. While VC investment started soft, the last two quarters have seen a number of excellent deals. This activity is very encouraging and suggests a growing positivity heading into Q1’20. Further, of late, there is a growing interest in the space from Japan’s trading houses, who are betting on the India consumption story,” Nitish Poddar, Partner and National Leader–Private Equity, KPMG in India, said.

Heading into 2020, companies in India are looking to attract attention from VC investors are expected to put more emphasis on reducing their cash flow and providing clear paths to profitability. Investors are likely to focus their investments on companies with healthy and sustainable growth models.

Logistics, education and e-commerce are all expected to remain hot areas of growth, it added.

Investment steady globally

Globally, VC investment remained steady in Q4’19 despite several market challenges that ranged from trade tensions between the US and China, the uncertainty leading up to the December general election in Britain, and the continued weakness of China’s economy.

While significantly lower than the record-setting level of VC investment seen in 2018, total annual VC investment globally remained higher than every other year on record.

Despite a small decline in VC funding year-over-year, the US continued to dominate the VC market globally, accounting for more than half of the VC investment seen during 2019, the study said.

Europe continued to see substantial levels of investment to finish off the year. At the same time Asia remained the primary weak spot in the VC market globally, with a massive year-over-year decline in VC investment and a smaller decrease in the number of VC deals.

VC investment in Asia remained relatively weak in Q4’19, despite $1 billion funding rounds to Beike in China and PayTM in India. Compared to 2018 results, VC investment in Asia dropped more than 42 per cent, in part due to the lack of massive mega-deals in China throughout 2019.

 

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