Startups funding gap to be filled up by private equity firms: KV Subramanian, CEA, India

The increased scrutiny of funds from China will hit Indian startup funding but its impact is likely to be temporary and the gap filled up soon by other private equity firms, said KV Subramanian, Chief Economic Adviser (CEA) of India, on Wednesday.

“There will be some impact, especially on startup funding in the short run. But I think within some time that space will get filled by others. There are a large number of private equity firms from other countries that are interested in participating in the Indian startup ecosystem,” Subramanian said during a virtual conference hosted by the Federation of Indian Chambers of Commerce and Industry.

The CEA was responding to a question regarding the government’s decision in April requiring direct and indirect investment from Chinese firms or benefactors to go through the government route, amid rising border tensions. While speaking on the theme of opportunities in India’s distressed assets market, Subramanian highlighted the need for an improved price discovery mechanism in the market for distressed assets along with a deeper corporate bond market.

“(A critical need is for) a market for price discovery of stressed assets because without that the process of taking haircuts itself becomes difficult. This is where distressed funds also play an important role and similarly the corporate bond market,” Subramanian said.

Countries like the US were able to take advantage of the creative destruction process through a vibrant corporate bond market, unlike in India where largely only top rated bonds are traded, he added.

Online auction of distressed assets

The Insolvency and Bankruptcy Board of India (IBBI) will soon be launching an online auctioning platform for distressed assets under its information utility facility, according to Sudhaker Shukla, IBBI member, who was part of the virtual panel.

“We are also developing a platform for distressed assets. It would eventually house the auction platform where distressed assets can be seen and intervention from domestic and international investors can be called for participation,” Shukla said.

While the platform was launched on October 1, the auction facility would take another six months to be functional, he added.

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