Venture capital, private equity funds bet big on traditional sectors

Venture capital (VC) and private equity (PE) funds had, in 2024, taken bets on traditional businesses rather than tech-first domains like consumer tech, software as a service (SaaS) and software.

 

According to data from Bain & Co, Pitchbook, Venture Intelligence, VCC Edge and AVCJ, prominent VC funds like PeakXV saw their share in this traditional space go up sharply from 14 per cent in 2023 to 23 per cent in 2024.

 

Lightspeed, a multi-stage venture capital firm, saw its share more than double from 11 per cent in 2023 to 23 per cent in 2024 while Z47, another VC firm, saw a surge from only 7 per cent in 2023 to 16 per cent in 2024.

 

Traditional businesses where they are investing are consumer retail, banking, financial services, and insurance (BFSI), manufacturing, shipping and logistics, engineering and construction, real estate, infrastructure and healthcare.

 

Investments in the BFSI segment went up 3.5x in 2024 over the previous year, touching $1.1 billion through 42 deals in which 47 per cent were above $50 million.

 

The hottest sectors in this category were affordable housing and NBFC where deal value went up 12x in 2024, while deals in green financing were up fivefold.

 

Consumer retail also saw overall value of deals touching 900 million in 2024, a 2.2 x increase over 2023, on the back of interest in food and beverages (F&B) and fashion-related segments.

 

As many as 125 deals were completed, which is more than double of last year at 54. Here, 70 per cent of the deals were over $10 million.

 

The big investments in this space included $107 million in BlueStone, $40 million in M-Stack, which is in advanced manufacturing, and a range of investments in BFSI. This includes Seeds Cap, STK Credit and Neo Wealth, totalling $60 million, and even in the energy sector with Solar Square — at $40 million.

 

Investors were also focused on profitability that was reflected in Delhivery — which saw earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins improve from negative in H1FY24 to positive in H1FY25.

 

And many regulatory actions helped. These include abolition of angel tax to boost early-stage investment, reducing compliance time for redomiciling to India from 18 months to 3-4 months before an IPO, Fema amendments to ease foreign investments, and lowering of long-term capital gains (LTCG) tax on unlisted shares.  

 

Moreover, consumer tech investments rebounded in 2024 as VCs put money in high quality players like Meesho, Zepto and Lenskart.