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Narayana Murthy
The family office of Narayana Murthy is growing cautious on startups in India, amid valuations and growth pangs.
“Middling startups struggling with growth that don’t have a clear path to profitability or aren’t making much progress are being sold at discounts of 30-40%,” Deepak Padaki, president of Catamaran Ventures LLP, told Bloomberg in an interview.
Catamaran is one of India’s largest private investors, running $1.3 billion for the Infosys cofounder.
“Funds that invested in these companies want to sell their stake because they are reaching the end of their fund terms,” Padaki said. “There may be opportunity for private equity or secondary funds but we do not have the bandwidth to take on companies that need extensive hand-holding for a turnaround.”
Real scene of startups in India
While the country’s startup scene is one of the world’s largest, valuations have dropped for several companies that struggled to grow and as investors ask tougher questions.
For instance, SoftBank Group Corp.-backed Oyo Hotels was once among India’s most valued startups, worth $10 billion in 2019.
Stiff competition has hurt its valuation and earnings.
The firm bounced back, but has delayed its stock listing several times.
Venture capital and growth deals raised in India during the pandemic at $38.5 billion in 2021, according to Bain & Co.
India’s family offices, venture capital firms, and ultra-high-net-worth businessmen continue to write checks for early-stage companies and their founders.
Catamaran is among those urging caution as it has invested in only two firms since the start of 2024.
According to them, the valuations for high-growth and profitable startups are too high.
At the same time, the private investor says deals for minority stakes without control are no longer attractive.