Connect with us
Saturday,21-March-2026
Breaking News

Business

As capital becomes expensive, startup funding takes a hit

Published

on

When capital was free, the best performing companies were capital consumptive. As capital has gotten expensive, these have become the worst performing companies, global private equity fund, Sequoia said in a recent meet with the community of founders.

As interest rates rise, valuations of cash guzzling companies and startups are being hammered and funding is drying up globally, and in India.

VC/start-up investments in India in April 2022 declined by 50 per cent year-on-year to $1.6 billion across 82 deals, according to the IVCA-EY monthly PE/VC roundup.

Vivek Soni, Partner and National Leader Private Equity Services, EY said the US Fed has started tightening monetary policy with a 50 bps interest rate hike and business risk premium/discount rates have gone up globally, which has had a significant negative impact on valuations of listed loss-making but growth-oriented start-ups. This is expected to have a spillover effect on the private capital side as well. Both start-up valuations and deal closures could see some slowdown in the coming few months.

According to the IVCA-EY monthly PE/VC roundup, April 2022 recorded investments worth $5.5 billion across 117 deals, including 16 large deals worth $4 billion. Exits recorded $1.2 billion across 13 deals, including six open market exits worth $483 million and one buyback worth $330 million.

Soni said April 2022 recorded US$5.5 billion in PE/VC investments, 27 per cent lower than April 2021 and 11 per cent higher than March 2022. Growth investments were back at the top after nine months with more than 2x growth y-o-y while monthly start-up investments recorded a 50 per cent y-o-y decline.

“The best performing assets ‘when rate expectations were falling – including technology, biotechnology, and recent IPOs- have been the worst performing assets. Simply put, the world is reassessing how business models fare in a world where capital has a cost and reconsidering how much credit to give companies for profits many years into the future”, Sequoia said.

“We are experiencing the 3rd largest Nasdaq drawdown in 20 years. It’s been an incredibly volatile last 6 months in the tech market. While it’s not quite 2001 or 2008, the Nasdaq is down 28 per cent since last November”, it added.

Sixty one per cent of all software, internet and fintech companies are trading below pre-pandemic 2020 prices. They’ve lost more than two years of stock price appreciation That’s despite many of these companies more than doubling both revenue and profitability.

One third are trading below COVID lows, when uncertainty and fear was peaking. Even more sobering, nearly one-third of these companies not only trade below their pre-pandemic stock prices, but they are now trading below the bottoms reached during March 2020 at the height of the COVID-19 pandemic.

The market is now pricing in lower values for many stocks than in March 2020 at the time of peak uncertainty. The market bounced back quickly from those lows with the help of an unprecedented combination of monetary and fiscal policy. Now with both those tools being withdrawn and moving from tailwinds to headwinds, the market is clearly indicating that the valuation framework over the last two years is no longer relevant with the removal of free money, Sequoia said.

It added that growth at all costs is no longer being rewarded. The era of being rewarded for hypergrowth at any costs is quickly coming to an end. EV/Revenue multiples across software have been cut in half over the last 6 months and now trade below the 10-year average.

Growth-adjusted multiples have fallen even further and are well below the 10-year average and pushing the 10-year lows. With the macro uncertainty around inflation, interest rates, and war, investors are looking for companies that can produce near-term certainty. Capital is becoming more expensive while the macro is becoming less certain, leading to investors de-prioritizing and paying up less for growth, Sequoia said.

The focus is shifting to companies with profitability. The focus on near-term momentum is often shifting toward companies Who can demonstrate current profitability. While the Nasdaq is down, Morgan Stanley’s unprofitable tech index is down 64 per cent. With the cost of capital (both debt and equity) rising, the market is signaling a strong preference for companies who can generate cash today, Sequoia said.

Cheap capital is not coming to the rescue. Unlike prior periods, sources of cheap capital are not coming to save the day. Crossover hedge funds, which have been very active in private investing over the last few years and have been one of the lowest cost sources of capital, are tending to wounds in their public portfolios which have been hit hard, Sequoia said.

Many don’t even have the capacity to invest, as the drawdown in their public portfolios has created an imbalance in their hybrid funds where their private investments (which have not been as dramatically marked down) represent more than the maximum private capacity within their funds, Sequoia said.

Shivam Bajaj, Founder & CEO, Avener Capital said alarmingly for the Startup ecosystem, private equity and venture capital investments declined by 25 per cent-30 per cent M-o-M in April 2022. Additionally, glorified startups including Nykaa, Zomato and Paytm continue to erode investor wealth by trading at approximately less than 50 per cent of their listing prices. With more than 6000 employees laid off in 2022 YTD by Indian Startups, capital providers might prefer delaying their plans to deploy their dry powder in expectations of future turnarounds in the industry. However, on the upside, asset-light business models built upon the pillars of consistent revenue generation, which deliver reasonable margins to investors instead of demanding rigorous burn rates, might potentially draw investor interest.

Siddharth Mehta, Founder & CIO, Bay Capital said the easy money policy of the Federal Reserve following the Global Financial crisis and accelerated in many ways at the onset of the pandemic had led to the excess liquidity getting funnelled into financial assets with increased speculative activity in such assets such as crypto currencies and NFT’s, over the last couple of years.

“India has been an equal beneficiary of this liquidity and now with the Fed being behind the curve in addressing inflation concerns and the extraction of liquidity with increased interest rates, it is definitely going to have a knock on effect on funding for early stage and late stage businesses as well”, Mehta said.

“Our view is that incremental capital will be allocated far better; investors will become far more discerning as they should have been; funding cycles will get more drawn out and diligence will be more robust and there will be far greater focus on profitability paths of these businesses. Its also likely that in some instances there will be consolidation and unfortunately mortality as well. The price damage in the public markets has still not fully cascaded down the stage curve and will happen very rapidly now. While this will have a negative impact in the near term, it is our view that over the long term, this will have positive effects as stronger businesses with robust business models, clear paths to profitability, scale and with clear differentiation will come out to be outsized winners”, he said.

Ravindra Bandhakhavi, Partner & Head-Private Equity, Cyril Amarchand Mangaldas says, “The global economic conditions are definitely impacting the funding environment for startups. There is much more emphasis on a proper diligence and a more robust corporate governance framework. Investors are also able to negotiate better rights as companies and startups are keener to have deep pocketed investors backing them at this point. Investors lastly are much focused on a path to profitability than they were before. Overall the more successful startups will still be able to raise funding while others will suffer potentially creating greater M&A opportunities in this space as well this year.”

Business

Iran war costs deepen split in US Congress amid scrutiny of $200 billion funding request

Published

on

Washington, March 20: Rising costs of the Iran war and its impact on global markets are deepening divisions in Congress, with Republicans and Democrats questioning the scale and purpose of a proposed funding request that could exceed $200 billion, according to multiple US media reports.

The White House is preparing to seek massive new funding for the conflict, even as scepticism grows within President Donald Trump’s own party over the lack of a clear strategy and timeline, CNN reported. Lawmakers say the administration has yet to fully explain how the money will be used or how long the US military engagement could last.

Trump signalled the request could be substantial, arguing the military needs resources to maintain strength. “We want to be in the best shape, the best shape we’ve ever been in,” he said, adding, “It’s a small price to pay to make sure that we stay tippy top.”

But that argument is facing pushback. Some Republicans have openly rejected further spending, reflecting growing unease about what several described as a potential “endless war”.

“I am a no. I have already told leadership. I am a no on any war supplemental. I am so tired of spending money over there,” Representative Lauren Boebert said, according to CNN. “I have folks in Colorado who can’t afford to live. We need America First policies right now.”

Others are demanding detailed answers before committing support. “What are we doing? We’re talking about boots on the ground. We’re talking about that kind of extended activity,” said Representative Chip Roy. “They got a whole lot more briefing and a whole lot more explaining to do on how we’re going to pay for it and what’s the mission here?”

Fiscal conservatives have also questioned whether the proposed funding could expand further. “It begs the question, how long do they plan to be there? What are the goals? Is this the first $200 billion? Does this turn into a trillion?” Representative Thomas Massie said, CNN reported.

The debate comes as the conflict intensifies in the Gulf. US and allied forces have stepped up operations around the Strait of Hormuz, deploying attack aircraft and helicopters to target Iranian naval assets and reopen critical shipping lanes, The Wall Street Journal reported.

“The A-10 Warthog is now engaged across the southern flank, targeting fast-attack watercraft in the Strait of Hormuz,” General Dan Caine said, adding that Apache helicopters “have joined the fight on the southern flank,” according to the Journal.

The escalation has already shaken global energy markets. Oil prices surged sharply as attacks on infrastructure across the region raised fears of supply disruptions, The New York Times reported.

Analysts warned the economic fallout could deepen if hostilities continue. “Energy warfare has been utilised from day one,” said Anna Jacobs, according to The Washington Post, noting that disruptions in the Strait of Hormuz have affected a key global supply route.

At the same time, lawmakers in both parties say they have received limited and incomplete cost assessments, adding to concerns over approving such a large sum. Some Republicans have proposed conditions, including spending offsets or audits of Pentagon finances, before backing any funding bill.

Senate leaders have indicated the path forward remains uncertain. “It remains to be seen” whether the request could pass, Senate Majority Leader John Thune said, according to CNN.

Democrats, meanwhile, remain largely opposed to approving funds under current conditions, further complicating the administration’s efforts to secure congressional backing.

The conflict has also triggered broader policy debates within the administration, including whether easing sanctions on Iranian oil could help stabilise global prices, The Washington Post reported. Officials say such steps could bring additional supply to the market, though analysts warn it could also strengthen Iran financially during the war.

Continue Reading

Business

LPG Crisis: How A Simple Digital DAC OTP System Is Plugging A Massive Black-Market Loophole

Published

on

India’s cooking gas distribution network has long been plagued by a quiet crisis – subsidised LPG cylinders meant for households routinely ended up in the black market, diverted by unscrupulous delivery personnel and agents. With the LPG crisis now deepening due to the US-Iran war, the government’s answer to this is deceptively simple – an OTP.

The Delivery Authentication Code (DAC) is a one-time-use code used to verify the legitimacy of home LPG cylinder delivery, ensuring the cylinder reaches the rightful customer. When a booking is made, the customer receives the code on their registered mobile number, which must be shown to the delivery person before the cylinder changes hands.

Ever since the crisis began, the government has significantly scaled up this system, with DAC coverage now reaching nearly 72 percent of deliveries, up from 53 percent earlier. The Ministry of Petroleum and Natural Gas has directed oil companies to ensure the DAC system is used in at least 80 percent of LPG deliveries, making OTP verification mandatory for the majority of cylinders.

Oil Marketing Companies (OMCs) have introduced the DAC system – sent via SMS and shared with delivery personnel – to ensure verified delivery, with IVRS/SMS refill booking also implemented nationwide, providing alerts at key stages including booking, cash memo generation, and delivery.

If distributors fail to meet the DAC requirement, the system flags cylinders as still in the agency’s inventory even though they have been delivered -creating a digital paper trail that exposes irregularities and improves transparency across the supply chain.

Consumers can ensure they receive DAC codes by taking these steps:

– Link your mobile number to your LPG consumer ID via your distributor or the Indane/HP/Bharat Gas app.

– Book via IVRS by calling your provider’s helpline – the DAC is sent automatically via SMS upon booking.

– Update details online at iocl.com or your respective oil company’s portal.

– Visit your distributor with photo ID and consumer ID if SMS is not being received.

– If the OTP does not arrive, customers can show their Aadhaar card as an alternate identity verification to receive the cylinder.

With the government pushing toward an 80 percent DAC compliance target, the system represents a low-cost, high-impact fix to a problem that has cost the exchequer significantly. For millions of households, it also means the subsidised cylinder they paid for will actually reach their doorstep.

Continue Reading

Business

India’s power plants well stocked with coal as PSUs step up production

Published

on

New Delhi, March 19: India’s thermal power plants have adequate coal stocks of around 53.41 million tonnes which are adequate for nearly 23 days at the present rate of consumption, and further stocks are also being built up at the pitheads of coal mining companies as a proactive measure to meet any exigency amid the disruption in oil and gas supplies due to the Iran war, the Ministry of Coal said on Thursday.

The pithead coal stock at the mines of Coal India Limited (CIL), which was 106.78 million tonnes (MT) as on April 1, 2025, has grown to about 125.54 MT as on March, 18, 2026. Further, there is around 5.75 MT of coal at the mines of Singareni Collieries Company Limited (SCCL) and another 15.75 MT coal at the mines of captive/commercial mines and about 12 MT in transit and about 5.49 MT in ports and good-shed sidings, according to a statement issued by the ministry.

Coal is continuing to ensure reliable baseload power to support core industries such as steel and cement that underpin the economic growth of the country. The coal production in the country continues at a pace matching the prevailing demands of the consumer and building adequate stocks at the mine-end for maintaining adequate supplies to the consumers as per their requirements, with the continued support of Railways, the statement said.

Coal India Limited is taking adequate measures to ensure the supply of coal to all consumers, including small, medium, and other consumers. As a proactive step, CIL has planned 29 e-auctions in the month of March, offering about 23.56 MT of coal. Out of these 29 auctions, 5 auctions have already been conducted since March 12, wherein 73.1 lakh ton of coal was offered, and 31.96 lakh ton of coal has been booked, indicating adequacy of coal offered in the e-auctions, the statement said.

In addition to this, CIL has also taken necessary action to ensure coal availability to the small, medium and other consumers through the State Nominated Agencies (SNAs) route and requested the state governments to provide the additional coal requirement, which can be met in full to avoid any energy shortages. The coal offtake of the states through the SNAs is being constantly monitored by CIL to ensure that uninterrupted supplies are ensured, the statement said.

The Ministry of Coal is ensuring a performance-driven ecosystem through sustained policy facilitation, robust monitoring mechanisms, and proactive stakeholder engagement. These concerted efforts are aimed at providing reliable coal availability, enabling uninterrupted operations across critical sectors, and effectively meeting the nation’s growing energy demands, the statement added.

Continue Reading
Advertisement
Advertisement

Trending