Indian startup valuations could be hit for next three quarters, warns report

The risk premium for investing in Indian startups has gone up significantly due to covid-19-led disruptions, and the valuation of ongoing deals may have taken a considerable hit, said a report by management consultant Duff and Phelps.

“With covid-19 causing a severe disruption in business operations, many Indian businesses have seen a major portion of their revenue streams erode rapidly. Without clarity on when these revenues and growth patterns will revive, risk premiums are expected to go up significantly, warranting a re-evaluation of valuation multiples,” the report said.

For the next three quarters, there might be down-rounds for various consumer internet startups, particularly in travel, tourism, entertainment and offline, or hyperlocal, merchandising, as individuals continue to remain indoors.

The covid-19 pandemic has also impacted deal flow. The decline in funding activity can be attributed to the down-round protection rights, which investors might be executing, making it harder for startups to negotiate deals. A down-round refers to financing, wherein the valuation is lower than the previous round.

The report said venture capital (VC) and private equity (PE) funds are focusing on helping their portfolio companies with additional equity infusion and bridge financing, to help the management teams to firefight on multiple fronts.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.