The investment climate for private equity and venture capital in India is looking up this year, signaling a more optimistic outlook than the previous year, according to Anuradha Ramachandran, Managing Partner at TVS Capital Funds. Investors are finding a new equilibrium after the disruptive period caused by the pandemic.
During the peak of the pandemic in 2020 and 2021, the investment sector experienced a surge in funding. Businesses that catered to the new digital and online needs, such as educational technology and direct-to-consumer ventures, thrived amidst the crisis. However, Ramachandran points out the challenge that lies ahead: maintaining growth when the pandemic-induced advantages subside.
“Now, the question is how do you sustain growth when structural disadvantages no longer exist. That is the conundrum both investors and businesses always faced and are still facing,” she explained.
The return to normalcy has led to more grounded discussions between investors and entrepreneurs, with both parties setting more realistic expectations. This shift is expected to bolster the domestic funding market, paving a smoother path for investment activities going forward.
However, the investment landscape has had its share of troubles. The ‘funding winter’ arrived when many global funds reduced their investments in India due to a scarcity of private funds and worldwide economic uncertainty. Despite these challenges, India remains an enticing market for early-stage investments, although return on capital still has room for growth in terms of market maturity.
Addressing the gender dynamics in entrepreneurship, Ramachandran acknowledged that while women tend to be more cautious with credit, they are also very responsible. Although they may have fewer opportunities, it’s promising to see an increasing number of startups with women co-founders.
