Mumbai-based Equirus Capital is looking to back profitable late-stage companies as India’s startup funding market enters a more selective phase, with investors prioritizing margins, liquidity and exit visibility over rapid growth.
Equirus’ new ₹1,500 crore private equity fund, launched in October, targets consumer, financial services, industrial manufacturing, and healthcare companies, with a focus on businesses that can provide a liquidity event within three to four years, Srinath Srinivasan, chief investment officer, alternative markets, told Mint.
The fund comprises a ₹750 crore base corpus and a ₹750 crore greenshoe option, and is expected to achieve its first close in the next couple of months. The seven-year vehicle will avoid backing loss-making businesses unless there is conviction that they can turn around quickly, he said.
“The idea is to back traditional companies of scale that may not dominate headlines, but have proven metrics and can deliver a liquidity event in three to four years. This is a seven-year fund, so loss-making businesses will not be a priority unless there is a clear and near-term turnaround case,” Srinivasan said.
The launch comes as India’s startup funding market becomes more selective, even though early-stage capital has held up better than late-stage funding.
According to Tracxn’s FY25-26 India Tech report, investors are concentrating larger cheques in fewer, higher-conviction early-stage bets even as late-stage rounds face a steeper reset in both size and volume.
The report showed that late-stage funding fell 38% year-on-year to $5.6 billion in FY26, while early-stage funding rose 33% to $4.8 billion. Overall funding declined 18% to $11.7 billion in FY26.
It also said $100 million-plus rounds dropped to 13 in FY26 from 23 in FY25, with enterprise infrastructure, enterprise applications and fintech accounting for a large share of those rounds.
Recent rounds by Emergent, Sarvam AI, Juspay and Scapia suggest investor appetite has not disappeared, but is concentrated in businesses with stronger execution and clearer scale potential. In the recent past, Emergent raised $70 million, Sarvam raised $234 million, Juspay raised $50 million, and Scapia raised $63 million.
Margins over growth
That marks a sharp shift from the 2021-22 investment cycle, when capital was abundant and price-to-sales multiples often pushed investors to underwrite deals. Inc42 reported that 2021 saw the highest venture capital inflow on record, with $42 billion raised across 1,583 deals.
“In 2019-21, many investors underwrote deals on price-to-sales and assumed they could exit at the same or a better multiple,” Srinivasan said.
The model has not worked as well and investors now need to think more carefully about what they are paying for, why they are paying it and how valuation will move over time, he added.
For Equirus’ future investments, the key factor is the investment horizon. “If the horizon is 10 years or more, the fund may wait longer for a thesis to play out,” Srinivasan said. “But if the horizon is seven years or less, then investment decisions will focus on the investee company’s margins, growth and exit potential,” he added.
The reset has been especially visible in consumer and fintech. Srinivasan said the market has shifted from traditional consumer businesses to D2C brands, many of which have scaled revenue but still struggle with economics and exit strategies.
He said fintech models have faced similar scrutiny, particularly in payments and unsecured lending, where monetisation is constrained and stress levels can rise quickly.
Beyond IPOs
Srinivasan, who has over 14 years of private equity experience, believes the next wave of liquidity is likely to come through secondary transactions and acquisitions rather than public listings alone.
“The question is really whether it is distressed or whether there is actual value in people going to acquire it,” he said.
Mint reported recently that secondary activity has become more institutionalised. India saw 51 secondary VC transactions worth $1.1 billion in 2025, up from 45 deals worth $1.5 billion in 2024, according to Venture Intelligence data. Startup M&A was also steady, with 214 deals worth $6.7 billion in 2025, versus 162 deals worth $8.2 billion in 2024, underscoring that liquidity is increasingly being created outside IPOs.
Consolidation has accelerated in the D2C space, with deals involving L’Oréal’s acquisition of a majority stake in Innovist, HUL’s buyout of Minimalist, Marico’s purchase of Plix, Emami’s acquisition of The Man Company and ITC’s Yoga Bar deal.
Srinivasan said Equirus will stay disciplined on valuation and avoid chasing businesses simply because they are growing fast. He said the firm wants companies with strong competitive advantages, predictable unit economics and a credible path to liquidity. “At the end of the day, an investor’s first job is to make sure the business case supports the valuation,” he said. “If it does not, then it is better to wait.”