As the macroeconomic landscape experiences uncertainties and geopolitical tensions, Indian investors are showing a preference for familiar sectors with lower risks. This cautious approach was highlighted by senior industry experts during a panel discussion at the Mint India Investment Summit in Mumbai.
Nishant Sharma, managing partner at Kedaara Capital, emphasized the importance of focusing on familiar risks and maintaining discipline in valuation and risk-reward assessments. He noted that private capital markets appear robust this year, signaling opportunities for strategic investments. Kedaara Capital, known for its investments in startups like Lenskart, Purrple, and Perfios, remains committed to prudent investment strategies amid market fluctuations.
Deepak Dara, senior managing director and head of India at Ontario Teachers’ Pension Plan, echoed Sharma’s sentiments, stressing the significance of selective investment based on value assessment. He expressed a long-term bullish outlook on India, emphasizing the importance of identifying promising market opportunities.
The prevailing economic concerns, including rising interest rates, have subdued investor sentiment, leading to reduced funding availability for startups compared to the peak levels witnessed during the pandemic. Consequently, investors are exercising caution and directing investments towards companies demonstrating clear paths to profitability.
Despite challenges in identifying growth opportunities across sectors, investors remain optimistic about India’s investment landscape. Nithya Easwaran, managing director at Multiples Alternate Asset Management, highlighted the strong valuations and increased allocation from Asia funds, indicating growing investor interest in Indian markets. Multiples Alternate Asset Management recently raised $640 million for its fourth Indian-focused private equity fund, diversifying its investment portfolio to include emerging themes such as the green economy.
Increased scrutiny on startups’ business models, particularly those that expanded rapidly with pandemic funding, has prompted investors to intensify due diligence processes. Vishesh Shrivastav of Temasek Holdings emphasized the importance of rigorous due diligence to ensure governance standards and mitigate investment risks. He emphasized that while market conditions may appear favorable, thorough due diligence remains essential for successful investments.
Ashish Kotecha from Bain Capital emphasized the evolving definition of governance, incorporating factors such as environmental, social, and governance (ESG) criteria and diversity considerations. Bain Capital adopts an active ownership approach and collaborates globally to understand market trends, contributing to value creation initiatives.
Overall, Indian investors are navigating the investment landscape with caution, focusing on sectors with lower risks and opportunities for sustainable growth. By prioritizing disciplined investment strategies, rigorous due diligence, and embracing evolving governance standards, investors aim to capitalize on market opportunities while mitigating potential risks.