Pranav Parikh, Managing Partner- Private Equity at Nuvama Asset Management confirmed that deals with warrants are falling through because of the lower- than- expected upside from the warrants. “In many instances these are getting converted into fixed return deals,” Parikh said.
Ashish Sharma, managing partner at Innoven Capital points out that venture debt players want to minimize credit risk in a weak equity environment.
“Ticket sizes, I would say, have gone up slightly because the mix is tilted towards the growth and late stage startups,” Sharma added.

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Warrants are typically converted into equity shares when startups next raise funds. However, the lack of confidence on the part of investors, the next round will fetch a better valuation, is holding them back from buying warrants.

Valuations in 2021, experts point out, were markedly high. The subsequent funding winter, as also the uneven performances of many businesses, has now seen valuations levelling off. Rather than take a chance on the equity upside, therefore, investors are choosing to close out pure debt deals and charge a higher coupon rate.

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