The first seven months of calendar year 2024 saw 68 debt deals in the Indian start-up ecosystem, which was the highest count of debt deals in the last six years, reported Xpheno, a talent solutions firm that also tracks deals and investments among start-ups.
The total value of debt deals raised in the first seven months of CY2024 is $1.35 billion. This is already more than 75% of the previous high of $1.8 billion seen in the whole year of CY2023, as per the analysis shared exclusively with The Hindu.
With five more months to account for, the trajectory pointed to a potential record-high year for debt deals in the Indian start-up ecosystem, said Prasad M.S., Head, Workforce Research at Xpheno.
“Rise in debt deals typically points to an ecosystem in stress, where start-ups are finding it hard to go for growth-based equity rounds. When raising equity becomes difficult, start-ups resort to raising debt rounds from existing or new investors,” he explained. According to the analysis, debt funds are raised to tackle operating cost and capex requirements, when revenue challenges and sluggish markets result in fund crunches and lowering valuations.
“Start-ups resort to raising debt after tactical interventions of cost-cutting and layoffs to offload costs are done,” Mr. Prasad added. However, industry veteran, investor and Managing Partner of venture capital firm, StartupXseed Ventures B.V. Naidu, said, ‘‘Start-up founders preferred collateral free debt over investments against equity to protect their ownership and hold in their ventures.’‘
The government’s Credit Guarantee fund Trust for Micro and Small Enterprises (CGTMSE) has been helping start-ups and MSMEs to avail collateral-free debts, Mr. Naidu added.
