India In Sight #60
Weekly updates on Indian private markets.
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Key reports in this edition:
Karnataka’s BioEconomy 2024 by Karnataka Innovation and Technology Society
Indian Startup monthly report (July 2024) by Entrackr
Equity Linked Incentives 2.0 report by Grant Thornton Bharat
Impact of new GST law on skill-based online games by EY
Supply chain resilience: a strategic imperative by KPMG
Navigating the journey to cloud-based core transformations by BCG
KEY DEALS
Equity
Neo, a wealth and asset management company, raised c.$27 million in a Series B funding round led by Crystal Investment. (August 03, 2024)
Black Box, an IT systems integrator, raised c.$50 million from existing promoters, FIIs and HNIs through preferential issuance of warrants to expand its data centre infrastructure services globally. (August 03, 2024)
Clix Capital, a Gurgaon-based NBFC, raised c.$26 million in equity funding from Apollo Global and other existing investors to bolster Clix Capital's lending capabilities across the MSME, education, and healthcare equipment sectors. (August 01, 2024)
Vayana Network, a trade financing startup, raised c.$20 million in its Series D funding led by SMBC Asia Rising Fund. Other investors include Chiratae, IFC Jungle Leaders, Quantum-state investment fund, and Emerald. (July 30, 2024)
Simple Energy, an electric two-wheeler startup, raised c.$20 million in Series A funding from various domestic family offices (Haran family office, A Velumani’s family office, Vasavi family office, and the Desai Family office). (July 29, 2024)
BluPine Energy, a renewable energy company, secured funding from Tata Capital for c.$30 million. The funds will be utilised towards a solar power project in Chattisgarh. (July 29, 2024)
Rapido, a bike-taxi startup, raised c.$120 million in a Series E funding round led by WestBridge Capital at an estimated valuation of over $1 billion to become a unicorn. (July 29, 2024)
[Expected] M2P Fintech (f.k.a Yap), an API infrastructure platform, to raise c.$80 million led by new investors including existing investors Insight Partners. The round has not been fully closed yet. (July 29, 2024)
Credit Deals and Issuances
SBI and Canara Bank to raise c.$1.8 billion and c.$480 million respectively through issuance of bonds. SBI is also further planning to raise c.$3 billion via issuance of Tier-1 and Tier-2 bonds in the coming few months. (August 01, 2024)
Kinetic Green, an EV-making arm of Kinetic group, raised c.$20 million in equity and debt from Greater Pacific Capital through the issuance of NCDs. (August 01, 2024)
BharatPe, a fintech firm, raised c.$10 million in debt from Trifecta Capital and Innoven Capital through the issuance of NCDs. (August 01, 2024)
Navi Finserv, a fintech company, raised c.$38 million from JP Morgan in a securitisation deal to accelerate its digital lending. (July 30, 2024)
KEY FUNDS AND FUNDRAISES
Trifecta Capital, a domestic venture debt fund, launched its fourth debt fund with a target corpus of c.$240 million. (August 02, 2024)
Gemba Capital, a micro venture capital firm, launched its second fund with a target corpus of c.$30 million. (July 30, 2024)
MARKET INSIGHTS & RESEARCH
Reports
‘Karnataka’s BioEconomy Report 2024’: Karnataka's BioEconomy sector is valued at $31 billion in 2023, growing 10%+ from 2022. The state added $9 billion in economic value from 2021 to 2023, a 41% increase. Karnataka accounted for over 30% of national biotech investments and contributed 21% to India's $151 billion BioEconomy, second only to Maharashtra. With $1.5 billion in R&D investments made over the past five years and 200+ new biotech startups in 2023, the state’s vibrant startup ecosystem further exemplifies this growth narrative.
Entrackr’s ‘Indian Startup monthly report’: In July 2023, Indian startups secured over $1 billion across 126 deals, with growth-stage deals amounting to $725 million and early-stage deals at $312 million. Despite a decline from June's c.$2 billion, this marked the highest July funding in three years. Significant deals included Purplle and Rapido, each raising $120 million. Bengaluru led city-wise funding with 42 deals, while fintech, e-commerce, and SaaS were the top sectors. Indian startups have raised $8 billion in the first seven months of 2024, with total funding expected to surpass 2023's $11 billion milestone.
‘Equity Linked Incentives 2.0’ report by Grant Thornton Bharat explores the evolving landscape of Employee Stock Option Plans (ESOPs) and other long-term incentive plans (LTIPs) in India. It highlights the rise in adoption of LTIPs from 63% in 2020 to 75% in 2024, driven by sectors like IT, financial services, and manufacturing. The report emphasizes the need for well-designed LTIPs that align employee performance with organizational goals. Key insights include the importance of tax-efficient solutions, clear communication, and regulatory awareness. It also discusses various LTIP instruments, including RSUs, SARs, and innovative approaches like blockchain-based ESOPs.
EY’s report on ‘Impact of new GST law on skill-based online games’ shares that levying a 28% GST on total money deposited with online skill gaming operators has significantly impacted India's gaming ecosystem, one of the highest taxations globally. This heavy taxation has stalled revenue growth for 58% of companies, led to workforce reductions, and hindered funding and sector growth. Industry players suggest taxing Gross Gaming Revenue or platform fees instead, to foster growth and prevent revenue leakage. The shift in tax policy could help the industry contribute to India's goal of becoming a $5 trillion economy by 2025.
KPMG report ‘Supply chain resilience: a strategic imperative’ highlights that only 55% of global supply chain professionals consider their supply chains stable, with 47% seeing them as vulnerable to disruption. Recent years have highlighted supply chain vulnerabilities due to COVID-19, extreme weather, and geopolitical events like the Suez Canal blockage and the Ukraine war. These disruptions caused shortages and price increases across various sectors. KPMG’s 2023 India CEO Outlook survey indicates that geopolitical uncertainty and climate change are major concerns for Indian CEOs. Building resilient supply chains, capable of resistance and recovery, is essential but challenging due to complexity and unpredictability.
Vertex Ventures’ note on ‘India's tech renaissance: Emerging trends and the $100 billion ambition of the ecosystem’ outlines that India's tech ecosystem has evolved significantly, with over 1,500 VC firms supporting 16K startups. Key trends include digital consumer brands, AI-enabled tech services, the "Make in India" initiative expanding to semiconductors, and a growing EV ecosystem. Innovations in vertical SaaS position India's tech industry to potentially exceed $100 billion by 2025, with at least 1,000 startups valued at $100 million or more.
BCG’s report on ‘Navigating the journey to cloud-based core transformations’ suggests that Indian financial institutions must modernize core systems with cloud-based solutions to address digital age challenges, customer expectations, and regulatory requirements. Key enablers include adopting new technology, investing in tech talent, and embracing innovative work methods. The report discusses two modernization approaches and outlines common pitfalls and a multi-step strategy for successful core transformation.
Articles
India ranked fifth in cross-border real estate investments in the Asia-Pacific region during the first half of 2024, capturing 9% of the total volume with $3 billion. The office sector attracted 36% of investments, followed by the industrial sector at 30%. Expected economic improvements may further enhance foreign investments in Indian real estate. Read more. [Paywall]
The Global Trade Research Initiative (GTRI) recommends a four-step plan to boost India's attractiveness to foreign investors. Key measures include reducing cost disadvantages for companies relocating to India, improving the Ease of Doing Business, and establishing a framework for evaluating investment proposals. In FY2024, India attracted c.$45 billion in FDI, just 1.1% of its GDP. GTRI suggests lowering costs related to labour, raw materials, energy, and finance, enhancing logistics, and inviting top global firms to drive innovation and productivity. Read more.
The Economic Survey suggests that FDI from China could enhance India's global supply chain participation through exports, despite India's 'China+1' strategy to reduce dependence on Beijing. The government denied easing restrictions on Chinese capital inflows, leading to a concern around the potential benefits and risks of Chinese investments in India. Read more.
Retail media is transforming India's advertising landscape, merging e-commerce with advertising by leveraging first-party data from consumer interactions. This shift allows hyper-targeted advertising based on shopping behaviour, making it crucial for reaching India's diverse market. The rise of quick commerce and deeper penetration into tier 2 and 3 cities enhances opportunities for brands, promising economic growth and digital inclusion. Retail media is set to democratize advertising, enabling small and medium-sized businesses to compete effectively. Read more.
The removal of the "angel tax" provides significant relief to startups and investors. Introduced in 2012, the angel tax targeted funds exceeding a startup's fair market value to curb money laundering but often imposed heavy financial burdens on startups. Despite partial easing in 2019, many startups remained affected due to limited certification by the Inter-Ministerial Board. The tax's removal is a major win for the startup ecosystem, promoting a more supportive environment for innovation and investment. Read more.
This note by Avendus highlights that the recent budget introduced changes aimed at normalizing tax rates across asset classes. Short-term equity taxation increased from 15% to 20%, and the tax advantage for arbitrage funds, similar to debt funds, has been reduced. These adjustments aim to alleviate pressure on deposits and curb excessive inflows into equities and arbitrage funds. Long-term equity tax rose slightly from 10% to 12.5%, maintaining investor sentiment. New STT and short-term tax rules are expected to moderate retail participation in derivatives, ensuring fiscal prudence and aligning with broader economic goals. Read more.
KPIs
India's service activity (HSBC PMI) down to 60.3 in July (vs 60.5 in June) as new business expanded at a slower pace and cost pressures mounted for firms. Manufacturing activity dropped to 58.1 in July, due to overall slowdown with experts expecting pickup in capex utilisation soon.
India’s core sector growth dropped to 20-month low of 4% in June, down from 6.4% in May, owing to a slowdown in five of eight industries and an unfavourable base. Q1 2024 growth was also lower at 5.7% vs 6% in Q1 2023. Core sector had expanded 8.4% in June 2023.
India’s GST collections rose by 10.3% to a 3-month high of c.$22 billion in July (vs c.$21 billion in June).
UPI transaction value stayed above $240 billion for the third month in a row in July. The average daily transaction volume was at 465 million (vs 463 million in June), while the average value of daily transactions was at c.$8 billion.
WEEKLY MARKET UPDATE (w/c July 29, 2024)
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