India’s fintech sector, an area of a penchant for venture capitalists, attracted investments worth $1.2 billion in the March 2023 concluded quarter. This sector witnessed a massive jump of 126 percent over the last quarter (Q4 2022), shows Tracxn data.
Late-Stage Investments, The Driving Force:
The late-stage investments worth $977 million boosted the growth. Six significant investments totaling more than $100 million were made in firms like PhonePe, Mintify, Insurance Dekho, and KreditBee, among others.
In Q1 2023, PhonePe alone raised $650 million in two Series D offerings. Premji Invest, General Atlantic, and TVS Capital became the most active late-stage investors during the quarter, per Tracxn.
The quarter-on-quarter growth shows a divergence from funding winter pervasive throughout Indian startups. However, the complete picture contradicts this. The fintech funding slumped 55 percent year-on-year against $2.6 billion raised in quarter one of the calendar year 2022.
“The fintech space in India is the second-highest funded geography after the US in Q1 2023 and occupies a spot in the top five geographies in terms of total funding activities. However, the funding is still on a declining trend when compared with previous years, although there has been an uptick in funding over the past few quarters,” Tracxn stated in its report.
Lukewarm Early-Stage & Seed Stage Funding Deals:
While late-stage funding showed positive growth, early-stage deals in the first quarter of 2023 went 30 percent downwards QoQ to $177 million. On a year-on-year basis, it dropped 76 percent.
Similarly, Seed-stage funding witnessed a scant inflow of funds, dropping 21 percent QoQ to $30.2 million during the just concluded quarter. Y Combinator, 100X.VC and LetsVenture were the top seed-stage investors during the quarter.
The fintech sector had an uneventful quarter in terms of IPOs and unicorns. “However, there was a slight uptick in acquisitions. The sector witnessed 11 acquisitions in Q1 2023, as against six acquisitions in Q4 of 2022,” Tracxn data revealed.
Fintech Sector, Still An Attractive Sector:
Notwithstanding the dip in the fund injection in the last 12-15 months due to a larger capital market slowdown, the fintech sector continues to be a tempting sector for global investors.
It is well known that India’s large consumer base readily embraces online payments, alternative lending, digital insurance, and other allied financial services.
“Further, the government’s push to promote a cashless economy combined with rising internet penetration in both rural and urban areas have contributed substantially in developing this sector within the country,” the report added.