3 Key Themes For Q4 2023: Venture Debt, Private Deal Creativity & Betting On India's Consumer Market
As we head into Q4 of this calendar year, the 3 themes that will dominate headlines will be a venture debt reckoning, the need for creating deals in the Indian private equity space through roll-ups and integrations and the continued theme to search for the next big Indian consumer bets for investors across India’s Private and Public markets.
The 3 key themes of note for 2023 Q4 will be:
Venture Debt Reckoning - Indian startups have absorbed a significant amount of venture debt over the last 3 years. The assumption venture debt investors have made is that they’re high up in the capital structure and their lending is secured via assets. A day of reckoning is coming soon where Indian startups will be demarcated into two components. On one hand, startups such as PharmEasy who had “real assets” of note that provide the venture debt investor with true protection in the capital structure and on the other hand a spate of startups with frothy valuations and little in terms of real monetisable assets where a lot of venture debt investors will be potentially wiped out on capital. All in all, for market players there will be significant opportunities for value capture.
Creative Deal Making In PE - Global interest rates have ensured that PE exits are hard to come by. India, additionally, is a highly competitive market with conglomerates providing significant competition with PE players having to play second fiddle. Indian PE players need to wake up and smell the coffee. True “buy and build” strategies that can combine rolling up assets with the operational expertise to create value will be needed. India is at the cusp of generation defining growth and roll-ups beckon.
Betting On The Indian Consumer - For investors, the Indian consumer story is the one to play in. Whether its home ownership or auto ownership, the aim must be to effectively allocate capital to sectors that can benefit from the growth. The key is realising that the entry price is a significantly important factor to be able to generate returns. Opportunities in the private and public markets must focus on the next Indian middle class 100 Million families and the consumption boom they will drive.
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