The number of private equity deals in India dropped 14% quarter-on-quarter in the three months ended March, according to a report from Refinitiv, a global provider of market data. The quantum of money invested, however, increased 26% on the back of some large infusions in Internet companies such as OYO, Swiggy, Zomato, Bounce, and Byju’s.

Investors had pumped in about $3.6 billion into Indian companies across 150 deals in the three months to March compared to $2.8 billion across 174 deals in the December quarter.

Internet-specific companies remained on the top of the charts in the March quarter, both in terms of number of deals and capital deployed. This cohort snared roughly $2 billion in 62 deals, followed by software companies, which mopped up $705 million across 33 deals.

Interestingly, Internet companies, which are largely loss-making and overtly dependent on private investments for survival, are likely to bear the brunt of the Covid-19 outbreak. With the nation under lockdown, such companies—across hospitality, ride-hailing or food delivery—have seen their business slump drastically.

A clutch of venture capital firms recently came together to warn such startups, which have been aggressively investing in expansion, of an impending slowdown in funding and reorient their businesses accordingly.

“Assume it will be very difficult to raise financing in the next three months, and possibly beyond,” says the note jointly put out by Accel, SAIF Partners, Sequoia Capital India, Matrix Partners India, Nexus Venture Partners, Omidyar Network India, Chiratae Ventures, Kalaari Capital, Bessemer Venture Partners, and Lightspeed.

“Assumptions from bull-market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about growth at all costs to reasonable growth with a path to profitability. Valuation multiples will be reset. This is because many investors perceive there is much more macro risk today and public markets are now valuing companies differently than a few weeks ago,” they added.

According to the Refinitiv report, investments in financial services companies particularly took a hit, in the aftermath of the NBFC (non-banking financial company) crisis. The number of deals and funds deployed almost halved in the March quarter as against the year-ago period. Financial services firms mopped up $583 million across nine deals in the quarter ended March 2020, as against $1.1 billion across 17 deals in the corresponding period last year.

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