India is one of the key markets for investors looking to capitalize on the fast-evolving tech sector as it has accounted for 56 per cent of deal value of the total PE and VC tech activity in the Indian and Southeast Asian markets since 2015, says a report.
According to the report by global risk management firm Kroll, and deal tracking firm Mergermarket, since 2015, India has seen the majority of total PE and VC tech activity with 71 per cent of volume.
As the next biggest market, Singapore accounted for 33 per cent of deal value and 10 per cent of volume, while Indonesia (7 per cent of deal value and 7 per cent of volume) was also on investors’ radar screens.
“As traditional banks continue to face pressure from non performing loans in India, and increasingly in Southeast Asia, technology companies seeking capital have been turning to private investors,” said Reshmi Khurana, Kroll’s Managing Director and head of South Asia.
“Moreover, governments in these geographies have been providing fertile ground for digitisation and tech investment through policy initiatives, by incubating tech funds with traditional banks or by initiating e-governance projects to digitise government services, attracting investment in ancillary industries like enterprise solutions,” Khurana added.
Private Equity (PE) and Venture Capital (VC) investors in Southeast Asia and India announced 170 technology transactions worth $2.6 billion in the first quarter of this year, and going ahead the deal momentum looks bullish.
Throughout 2017, India and Southeast Asia received $18 billion in technology deals, up from $6.5 billion in 2016, indicating the attractiveness of these high growth markets.
The report noted that investors are looking to capitalize on the tech sector as technology is expected to reshape some of the core growth sectors in these countries, such as financial services, education, healthcare, and retail.
The report further noted that while local or regional funds have been the dominant players in these markets, foreign investors have been making inroads.
US investors took part in 25 per cent of tech investment occurrences from 2015- to the first quarter of this year, followed by Japanese (5 per cent) and European (4 per cent), the report noted.
“Globally, traditional tech investors like Tiger Capital, SoftBank, have almost doubled down on investments in the region, catalysing the rise of locally grown tech unicorns,” Khurana said.
Going ahead, PE investments in the tech sector may begin to look up in 2018 and beyond.
In the next 12-24 months, both regions may see steadier international interest and buyouts as more investable targets start to reach the size and growth stage that render them ripe for the picking, the report titled ‘Staying ahead of change: Investing in disruptive tech in India and Southeast Asia’ said.