PE/VC funding outpaces IPOs

The report states that the growth rate in PE/VC funding has outstripped that of IPO markets.

Though funding by PE/VC firms in start-ups have slowed down in recent times due to lack of viable business models among the start-ups, PE/VC investors have still fuelled growth of budding industries in newer economy areas like e-commerce, fintech, and microfinance.

According to a Venture Intelligence report, in the six-year period between 2011-2016, PE/VC firms invested over $72 billion in Indian companies, which is over 6.5 times what India Inc raised through initial public offerings during the same period.

The report states that the growth rate in PE/VC funding has outstripped that of IPO markets. For example, the CAGR of capital raised from IPOs during this period was about 8 per cent, whereas the CAGR of PE/VC investments was about 14.9 per cent.

However, the annual growth rate of profits for PE-/VC-funded companies during this period has been the lowest at -73 per cent. This, according to the report, is understandable because the firms funded by PE/VC investors are in the growth phase, where the firms concerned would have to make significant investments and also incur significant new expenditures.

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