What are Private Equity (PE) funds?
Private Equity Funds are investment bodies which put capital into non public traded companies. PE money comes from private sources. PE firms specialise in specific industry sectors and are mostly located at Tier I Indian cities.
Private Equity’s interest in Consumer Technology
Private Equity Funds are interested in funding sprees for technology-based consumer brands with the potential to disrupt the market. Consumer Tech is on the hot list for PE funds this year alongside sectors like healthcare, IT, and ITES. Consumer Tech is showing ample growth opportunities making it a hotbed for investor play. The main reason for this is that PE funds’ strategic exposure to industries like Consumer Tech which have largely been resilient during Covid is working well for them.
The Consumer Technology sector has been seeing investments from PE funds right from 2019. So, this is not a new trend but one that’s been picking up pace. Among consumer tech companies which saw highest PE funding, the name that pops up is Jio Platforms. In fact, Jio Platforms bagged the highest PE funding in India amounting to $8.9 B. The second most well-known name is of course, Byju’s which recently received $500 M from PE fund Silverlake. PayTM is the next start-up from the Fintech world which has partial private equity ownership. Nykaa had in 2019 obtained INR 100 Cr in funding from private equity fund TPG capital. General Atlantic, a Private Equity firm has invested in Unacademy, India’s Unicorn ed-tech start-up.
Among consumer tech companies which saw highest PE funding, the name that pops up is Jio Platforms
What’s in it for me?
The consumer tech segment, especially its sub segments including ed-tech, food tech, and logistics tech are experiencing strong investment momentum. These sectors will continue to be in focus in terms of the investment momentum. These segments saw a flurry of activity in terms of deals due to Covid-19 induced transformation in consumer behaviour and market landscape. Consumer Tech offers large market opportunities and has a lot of space for growth.
Bain & Co., a Management Consulting company recently released its ‘India Private Equity Report 2021’ according to which consumer tech was seen as the key sector for private equity funding this year. Furthermore, this report also states that the food tech sector has seen significant uptick in terms of PE funding. Also, the sub sectors in fintech which are most eligible for private equity investments are payments and insurance technology.
Private Equity Funds are particularly interested in ‘digitally accelerated opportunities’ in consumer tech this year. In 2020, the number of PE funds in India increased which is great news for existing and upcoming consumer tech start-ups since it increases scope of funding. Gulf Islamic Investments, a PE fund from the United Arab Emirates (UAE) is interested in investing into the Indian start-up ecosystem. The firm has announced that they have a ‘personal interest’ towards Indian start-ups from the consumer tech and healthcare sectors.