VC investment in India at $3.6 billion in Q3'24: KPMG

VC investors growing more cautious in fintech space while AI-powered defence-tech companies raised large rounds in Q3, the report notes.
KPMG.
KPMG.(File photo | Reuters)
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BENGALURU: Fintech businesses in India have been continuing to attract a lot of attention, but venture capital investors in the space have become more cautious in recent quarters as traditional banks have increasingly introduced their own fintech products aimed at the large unbanked and underbanked segments of the population, according to the Q3’24 edition of KPMG Private Enterprise’s Venture Pulse.

The report said that banks have been particularly successful with the development of lending products given their existing scale and the capital available. This has, however, led to a number of smaller fintech lending platforms in the country fizzling out.

The report highlights VC investment trends globally, and pointed out that from a five-quarter high of $95.5 billion in the second quarter of 2024, global VC investment fell to a seven-year low of $70.1 billion in the third quarter of this year due to ongoing geopolitical conflicts and anticipated seasonal lulls in investment, among others.

However, in India, despite a decline in Q3’24, VC investment remained solid at $3.6 billion due to fund raising by many consumer-focused businesses including quick delivery start-up Zepto ($360 million), hotel-booking company OYO Rooms ($349 million), and edtech company PhysicsWallah ($210 million). In Q2, it was $4.5 billion and in the first quarter, venture funding was $3.1 billion.

Other big deals included beauty-focused online marketplace Purplle ($120 million), and eyewear retailer Lenskart ($100 million).  Outside of the consumer retail space, two and three wheel electric vehicle and components manufacturer Omega Seiki Mobility also raised $150 million during the third quarter.

Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India said, "As expected, there has been a bounce back in activity which is led by consumer focussed consumption sectors. This trend is expected to continue, and investors will back businesses which align with two key themes - path to profitability and / or strong growth trajectory with high level of customer engagement. This coupled with robust capital markets is what is driving this renewed VC interest."

Pointing out the trends to watch for in the fourth quarter, it says VC investment in China is expected to remain relatively subdued, with the exception of government priority sectors like AI and semiconductors. In India, however, there is very strong optimism that the VC market is recovering and that the next few quarters could see the level of VC investment really start to climb. 

While VC investment could be considered low in all regions of the world this quarter, AI continued to garner a lot of interest in the third quarter as six of the ten largest deals during the quarter were AI focused. While core AI firms continued to attract VC investments during the third quarter, VC investors also showed very strong interest in AI-driven industry solutions. In particular, AI-powered defence-tech companies raised large rounds in Q3, according to the report.

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