Deal street warming up for Indian startups finally

After suffering an extended global funding winter, Indian startups have begun to witness the return of big-ticket deals of the size of $100 million and more, The Economic Times has reported. The deals are benefitting the strong businesses that are moving fast and on the route to profitability, industry executives told the newspaper.

A few deals that are in the works involve Lenskart and beauty brand Purplle, the report claimed. Lenskart has been valued at about $6 billion. The negotiations around Purplle are rumoured to veer around $100 million. Most of the deals right now being baked involves existing sponsors selling out to make way for incoming investors amid pressure to clock returns. HealthKart which is backed by Temasek and Rapido supported by Swiggy are also discussing fresh funding deals.

Only those startups that have survived the pandemic blues by tackling losses through aggressive cost-cutting and achieved growth are witnessing interest from possible investors.

For Indian startups, the funding dip was sudden and cruel. In 2021, Indian startups attracted a record capital flow of $38.5 billion. In the subsequent years in went down sharply. The venture capital investors who disappeared are now moving back with renewed interest in deals, trying to focus on leaders from a variety of sectors such as healthcare, beauty, quick commerce, hyperlocal mobility.

“While post-Covid headwinds separated good companies from bad ones, there have been no big deals in the making for the past two years; now that’s changed and investors are keen to deploy capital raised….. demand for Lenskart as it has been one of the top performing companies since the onset of Covid-19 and after,” an executive told the newspaper.

Gurgaon-based Lenskart is seeking a sharp rise from its earlier valuation of $4.5 billion. Its current investors, including SoftBank and Chiratae Ventures, might exit in a secondary deal.

Purplle has as its existing investor Abu Dhabi Investment Authority (ADIA). Purpelle is exploring investments from domestic investors to maintain a 51% or more holding by locals. Mumbai-based Purpelle was earlier valued at $1.1 billion. In 2023, ADIA and Manipal Group chairman Ranjan Pai’s family invested in this business when it purchased shares from JSW Ventures.

Health supplements startup HealthKart is also on the deal street. It is reportedly discussing with private equity fund ChrysCapital for a $100-150 million secondary transaction that could witness an exit for HealthKart’s initial investors. The company’s valuation could rise from $370 million to $500 million in this financing round, executives told the newspaper.

Rapido was valued at $830 million in 2022. It, too, might fetch a higher valuation now. However, neither the companies nor the investors who are holding discussions with them did not make any comment to the newspaper.

A few other prominent startups are also exploring big funding deals. These entities are Meesho, Zepto Pocket FM which is an audio streaming platform. There is a feeling among industry experts that the number of deals will rise in the days to come.

Significantly, Lenskart is one of those companies exploring options to tap the stock market with an IPO in the next 18-24 months. Significantly, in a secondary share sale, the money that changes hands between two investors goes from the pocket of the buyer to the seller and the company’s coffers do not directly benefit from the sale.

“As of now, ChrysCapital has been in talks with HealthKart and due diligence is underway. Other investors may also join the round depending on final valuation,” an executive told the newspaper.

HealthKart registered a 70% (y-o-y) rise in operating revenue in FY23 at Rs 832.48 and cutting down its net loss by almost 50% to Rs 164.71 crore. At the end of 2022, HealthKart was valued at under $400 million when Singapore’s Temasek put money in the company.

According to the report these deals could be closed in the next few months and the data would appear in funding data in the next two quarters. Usually there is a delay of three to six months before these share sales are made public. During the January-March quarter of 2024, the total funding stood at $2 billion. It was a sharp dip from $3.2 billion during the corresponding quarter in 2023.