Reduction in valuation of startups by foreign investors

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New Delhi: Many big Indian startups may now face collapse as foreign investors have started reducing the valuation of these startups. Analysts and investors say their valuations have dropped by up to 60 per cent. This fall in valuations is likely to continue as the startup sector continues to recover amid liquidity crunch.

The startup world, especially new startups in the market, has seen a 50-70 per cent drop in valuations. US-based investment firm Invesco is the lead investor in online food delivery platform Swiggy. On May 8, it reduced the valuation of food aggregator company Swiggy for the second time to $5.5 billion. Earlier in October, it had reduced its valuation to $8 billion. The revised figure is about 49 per cent lower than the $10.7 billion valuation that Invesco had earlier given the startup as of January 31, 2023.

Zomato’s market capitalization has also declined by 40 per cent in the last 12 months. As of March 31 this year, Zomato’s market capitalization was around $5.2 billion. This trend is not limited to food aggregators.

American asset manager BlackRock recently cut the valuation of education technology (edtech) company Byju’s. Byju’s valuation has almost halved, falling from $22 billion to $11.5 billion. Last year, SoftBank, which backed hotel and travel tech company Oyo, slashed the company’s valuation by 20 per cent to $2.7 billion.

The process of investment continued even during Corona when startups raised a lot of funds at high valuations. But now investors have started spending cautiously as they expect new companies to post healthy margins. According to data from market intelligence platform Truckson, 3,123 deals increased to $44.3 billion in 2021.

Annual funding of 2,462 deals in 2022 has declined by 39 per cent to $27.1 billion. Startups have collectively raised $4.1 billion so far this year. A decreasing trend is observed in high speed objects.

Investors are wary of backing companies focused on expansion without a clear plan to maintain profitability and stability. This trend will continue in the near future as well.