Venture Debt Surge in India Fuels Fintech and EV Innovation

New Delhi, Nov 15 (KNN) The venture debt market in India is steadily maturing, mirroring the early stages of venture capital, particularly in high-growth sectors like fintech and electric vehicles (EVs).

A report by global investment firm Lighthouse Canton, released Thursday, highlights this expansion, driven by Indian founders’ growing preference for non-dilutive funding options.

In a funding landscape constrained by limited equity investments, founders are increasingly turning to venture debt to bridge financial gaps while retaining ownership.

According to the report, the primary allure of venture debt lies in its non-dilutive nature, with 40 per cent of founders citing it as the top reason for choosing this financing option.

Additionally, flexible repayment schedules appeal to 30 per cent of respondents, underscoring its adaptability for scaling businesses.

“India’s startup ecosystem holds immense potential, and the growth of venture debt funding is playing a pivotal role in driving its development,” said Sanket Sinha, Managing Director and Global Head of Asset Management at Lighthouse Canton.

“This funding mode fosters innovation, empowers startups, and supports sustainable growth across the nation’s dynamic business landscape,” he added.

The fintech sector, now the world’s third-largest, has been a significant driver of this trend. With innovations like the Unified Payments Interface (UPI) revolutionising the market, venture debt has become essential for fintech startups, aiding in cash flow management, onward lending, and growth acceleration.

Similarly, the EV sector, marked by capital-intensive operations and unique risks, is increasingly reliant on venture debt. The report revealed that 67 per cent of EV startups source more than half of their debt funding through venture debt, highlighting its critical role in their expansion.

Traditional lenders, wary of the high-risk nature of the EV sector, often hesitate to fund these startups, making venture debt a vital alternative.

As venture debt gains traction, it is reshaping India’s startup financing landscape, offering a strategic solution to fuel growth in capital-intensive and fast-evolving industries. This evolving ecosystem is set to power India’s entrepreneurial innovation and economic resilience.

(KNN Bureau)