Peyush Bansal, cofounder and CEO, Lenskart
On Thursday, Lenskart saw a $100 million investment by private equity major ChrysCapital, confirming ETtech’s newsbreak from February. This brought the curtain down on what’s essentially a $600 million investment in Lenskart, around $450 million of which is in secondary share sales. In March, the Abu Dhabi Investment Authority (ADIA) invested $500 million in Lenskart, buying shares from investors like SoftBank, Premji Invest, and Kedaara Capital. In a secondary share sale, existing investors sell their shares to new investors and the money doesn’t go into the company’s coffers.
What’s driving this?
New capital — in primary funding — is increasingly hard to come by due to a host of reasons, including global macroeconomic conditions and a reset in valuations. In this scenario, existing investors who want a partial exit from older investments are game for such deals.
“What’s happened over the past many months is that it’s clear which assets are doing good despite the funding drought, and global investors are willing to enter these firms at a time when deal-making has ground to a halt. While we closed a recent secondary deal, a bigger such sale is being planned which will close in the coming months,” a founder of one of the firms ETtech spoke to said.
Our conversations with some of the firms — which have enough money to withstand the funding freeze — show that they do not want to raise new capital as they may not get the best value for it, and thus are exploring ways to facilitate partial exits for their investors.
Recent examples
Besides Lenskart’s $600 million deal, new-age logistics firm Xpressbees saw its existing investor Elevation Capital diluting its stake further in the Pune-based firm and selling to Malaysia’s Khazanah Nasional.
This was not the first secondary sale being done by Elevation Capital. It had sold a chunk of its shares to new investors last year as well as part of a $300 million investment round when it became a unicorn.
ETtech has reported about similar deals being planned at FirstCry before its potential IPO, where its largest investor is looking to sell a part of its stake. Flipkart parent Walmart is working on giving a full exit to the e-commerce firm’s early investors —Tiger Global and Accel — in a transaction valued at least $1.5 billion.
Sovereign funds in action
Sovereign wealth funds are driving these deals and are actively in discussions for future investments with late-stage startups — seeking big-ticket deals of at least $100 million — whether primary or secondary.
“The cost of capital is still relatively low for these funds and they have a really long outlook on such investments. Right now, for any significant investment, startups are largely chasing these funds,” a senior industry executive involved in funding talks said.
Of the $600 million plonked on Lenskart, $500 million came from ADIA, the Gulf sovereign wealth fund. Sources have said investors like Temasek, Khazanah Nasional, GIC, and Qatar Investment Authority are in active talks for doubling down on existing and new bets through a mix of secondary and primary share sales.
This should keep the action alive in India’s startup ecosystem.
ETtech Exclusives
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Drawing on a record inflow of venture capital in the past decade, 297 founders have set up some 253 startups, igniting talk of a “startup mafia.”
The term ‘mafia’ for startup executives who go on to launch their own ventures draws from the famous ‘PayPal Mafia’ moniker, which was used to describe former employees of the payments platform who became entrepreneurs.
Foxconn may set up an EV factory in India this year: Foxconn, best known as the maker of the iconic Apple iPhone, is looking to enter the electric vehicle (EV) manufacturing space in India, according to people directly in the know who said the Taiwanese contract manufacturer has been in talks with some state governments to further its plans.
Officials from four states — Maharashtra, Telangana, Tamil Nadu, and Andhra Pradesh — had met top Foxconn executives during their visit to the country last year to discuss their EV plans, sources said.
Government delegation in Taiwan to make EV pitch to Foxconn: Indian officials are currently in Taiwan to meet executives at contract manufacturer Foxconn and present the country as an attractive destination for electric vehicle (EV) manufacturing, people in the know told ET. The delegation from the union government will also brief Foxconn on how India is exploring and evaluating potential reserves of minerals like lithium, nickel, manganese and cobalt, the sources said.
India set to approve Micron’s $3 billion semiconductor assembly, test unit: India is poised to approve a $3-billion investment by US semiconductor company Micron to set up an outsourced semiconductor assembly and test (OSAT) unit with at least four assembly lines, people in the know told ET. The Idaho-headquartered company will initially invest about $2.5 billion with more investments likely to be made over a five-year period, sources said.
ETtech Deep Dives
Farm to Fork: How ONDC is giving nationwide visibility to FPOs | Farmer Producer Organisations (FPOs) aren’t typically on e-commerce merchant places such as Amazon and Flipkart, where they can easily access consumers beyond their immediate neighbourhood. The Open Network for Digital Commerce (ONDC) is looking to change that.
Advantage India as local companies ride the ‘AI outsourcing’ wave: The faster adoption of generative AI globally has an “advantage India” angle. AI consulting firms are seeing increased client interest as they are getting requests for proposals (RFPs) and projects around the new technology.
Fintech Updates
Policybazaar expands revenue share from new business lines: Gurugram-based insurance broker Policybazaar is quickly expanding the share of revenue from its new business lines, as it diversifies from just being a consumer-focussed online insurance distribution platform.
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After UPI, now credit cards overtake debit card transactions: India’s digital payments story is increasingly swinging towards credit. While the country was historically a debit card-using nation, recent data from the Reserve Bank of India shows that credit card transactions have gone up significantly. With 25 crore card transactions for merchant payments in April this year, credit cards have overtaken debit card payments, which stood at 22 crore.
Amazon Pay counts on wallets to push payments business: Amazon Pay, the digital payments arm of the e-commerce major, is betting big on the traditional mobile wallet business to get back into the leadership game in consumer payments. Amazon is still not on the payments leaderboard in India even with the entire gamut of financial services across payments, credit, and insurance.
Venture Capital News
India not for the fainthearted, but worth it: Lightspeed’s Bejul Somaia after Sequoia’s exit | India’s potential remains “incredibly compelling” with its sizeable market, high-quality founders, and adoption of technology, Bejul Somaia, partner at Lightspeed Venture Partners, said in a note posted on Twitter. “The question is not whether there is potential, but how best to navigate this potential’’.
Also read | Became too complex to run a global investment biz: Peak XV’s Shailendra Singh on Sequoia split
Sequoia’s exit from India doesn’t make sense: Chamath Palihapitiya | Silicon Valley investor Chamath Palihapitiya said venture capital firm Sequoia Capital’s decision to hive off its India partnership did not make sense considering it is one of the fastest growing economies in the world.
ETtech Deals Digest: Indian startups raise $174 million this week | The ongoing funding winter for Indian startups looks unlikely to end anytime soon with new-age companies scooping up only $174 million across 20 rounds last week, according to data provided by market intelligence firm Tracxn. Funding activity in Indian startups declined 83% from the same period last year, when companies had raised $1.05 billion across 60 rounds.
Sequentially, startups raised 71% more than the $102 million they raised last week from 21 rounds.
This boost in funding could be attributed to private equity fund ChrysCapital’s $100 million investment in omni-channel eyewear retailer Lenskart.
IT and Hiring
More women logging out of tech jobs: As the effects of Covid wane and companies insist on employees returning to office, the attrition of women has doubled compared to that of men in India’s technology industry, data from recruiters and exit interview firms shows.
Female employee attrition has gone as high as 30-40% in recent months, compared with the standard sector attrition levels of around 15%.
IT headcount may fall in Q1 as companies see dip in client additions: India’s top IT companies are expected to report a dip in headcount in the first quarter of the year ending in June, as they continue to grapple with slower client additions amid a tough macroeconomic environment. The hiring squeeze is driven by a greater focus on improving efficiency and margins, experts said.
Other Top Stories This Week
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Jack Dorsey’s allegations outright lies: MoS Rajeev Chandrasekhar | Top Indian lawmakers strongly refuted claims by Twitter’s former chief executive Jack Dorsey that the government had pressured the microblogging platform to remove certain user accounts during the farmers agitation, and termed the allegations “an outright lie’’.
Government denies CoWIN data breach, asks CERT-In to probe: CERT-In was asked to probe as to how a bot on the instant messaging app Telegram was able to provide details of a person’s vaccination date, the place where they were vaccinated against Covid, along with the date of birth of the person.
Supreme Court revives ban on Uber, Rapido bike taxis in Delhi: The Supreme Court stayed a Delhi high court order that had allowed Uber, Rapido, and other two-wheeler taxi companies to operate in Delhi, reviving a ban imposed by the government of the national capital.
LogiNext cofounder Manisha Raisinghani leaves to start new SaaS firm: Manisha Raisinghani of LogiNext Solutions, has moved on from the logistics-based software-as-a-service startup and is working on building a new enterprise software firm, three people aware of the matter told ET.
New draft policy promises to level ecommerce playing field: The new e-commerce policy will bring parity between foreign and Indian marketplaces, and no such entity will be allowed to hold any equity in sellers on their platform, or hawk private labels on the platform, a consumer affairs department official told ET.
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