New Delhi: HNI investors have been aggressively picking up stakes in private tech-enabled companies in India, out of which some are planning to target the primary market soon.
Kristal.AI, a digital-first private wealth advisory and fund management firm, has completed more than 20 deals in the unlisted market. It has an AUM of $30 million for all deals launched so far. This includes the likes of Byju’s, Dunzo, Klarna, Thrasio, Meesho among others. Global players such as SpaceX and Epic Games are also highly preferred by rich individual investors.
Such investors prefer tech-enabled sectors including metaverse, e-commerce, social commerce and rapid delivery, and putting their money in businesses with a fast potential to grow and significant economies of scale.
Key segments such as B2B and clean energy have also gathered traction. Despite the regulatory ambiguity and uncertainties, crypto-based startups have also found a significant interest from investors.
Manmohan Mall, Head – Private Markets, Kristal.AI, believes that companies with a clear timeline on their IPOs are gaining more traction as it allows existing investors to make complete or partial exit with substantially higher returns in the long run.
“We have seen strong investor interest in the pre-IPO names with a structural reason behind it,” he added.
“Liquidity has improved in private markets and the lure of IPO for purely liquidity-driven purposes is lesser.”
He said that such companies have a high conviction on their growth story and raise funds at realistic valuations. They have less complicated structures, diversification and sound management with clear vision.
Investors are tapping the private tech space to generate better alpha with a sense of ownership in such companies. According to Kristal.AI, the minimum ticket size of such deals is about $25,000, which may increase for some specific deals.
“Pre-IPO deals in proven business models where there is sufficient alpha are being seen as important additions to the portfolio,” Mall said. “Personalized experience with a human touch is becoming essential.”
Majority of investors buying stake in tech-based startups are between 40-55 years of age, suggested data from Kristal.AI.
More than half of the rich investors buying stake in pre-listed Indian players hail from Singapore, followed by India’s own locals and Hong Kong. India is the third largest market for startups globally followed by the US and China.
With a long-term perspective and sound investment strategy, HNIs are typically allocating about 20 per cent of their portfolio in alternative investments avenues.
“Pre-IPO markets have been a mixed bag in the recent past,” said Neha Khanna, Director, ValPro, a tech-based investment banking platform. “If the value unlocking has happened at the pre-IPO pricing, the investment may not yield the desired return.”
The pandemic witnessed more savings, leading to widening of asset classes for retail investors and pre-IPO has became one such investment, she added.