Chiratae Ventures: Chiratae Ventures gets $70 million via portfolio sale as VCs eye exits

In a significant development in India’s venture capital industry, Chiratae Ventures–one of the country’s oldest early-stage funds that has invested in companies such as Lenskart, FirstCry and Policybazaar–has sold stake in some of its portfolio firms to Madison India Capital, people aware of the matter said.

The transaction is expected to have given these stakes a collective valuation of about $70 million, including shares sold in high-profile companies like omni-channel eyewear retailer Lenskart, the sources said, adding that it was a bulk secondary deal.

The sale by Bengaluru-based Chiratae, formerly IDG Ventures, involved companies from its Fund-II, which was $95 million in size, and Fund-III with $208 million in capital, the people cited earlier said.

As part of the deal, the fund sold stakes in firms like vendor management startup Bizongo and Rentomojo, a rental platform for furniture, according to the sources.

Email queries sent to Chiratae and Madison India Capital remained unanswered till as of press time.

Madison Capital is backed by New York- headquartered Lexington Partners, an LP which specialises in secondary transactions.

In 2017, Madison had coughed up $180 million for stakes in Sequoia Capital India (now Peak XV Partners) portfolio firms like payments platform Pine Labs, health insurer Star Health, India Shelter Finance Corporation, Snapdeal and Micromax.

“The transaction was completed a few months ago after Chiratae decided to offload shares in some of its companies…,” said one of the people cited earlier, requesting not to be named. “The $70-million cash exit will be an overall good return for them, as the two funds (Fund II and II) were small in size…”

The transaction comes at a time when there is pressure from global limited partners (LPs) who are sponsors in investment funds to show exits and returns from India.

The lacklustre performance of most Indian venture capital funds, after raising record capital, clubbed with the tepid funding environment, has forced VCs to look for ways to cash out. Also, secondaries in late-stage companies have also picked up significantly since the last year to bring in liquidity, as ET had reported on March 21.

Chiratae, founded by Sudhir Sethi and TCM Sundaram in 2006, began as the Indian arm of US-based IDG Ventures. It has focussed on backing early-stage technology startups. The firm has been in the market to raise its fifth India-dedicated fund and will gain from the cash exits.

“In the current market, we are seeing funds explore secondaries at a portfolio level and we expect that to gain momentum, as the need to demonstrate DPI increases,” said another person in the know. Distributed to paid-in capital (DPI) is a term used to measure the total capital that a fund has returned to its investors.

Such secondary portfolio sales by funds work only when clubbing together a basket of companies– good and bad–to make it an attractive proposition for the incoming buyer.

“Typically, the incoming investor is presented with a mix of companies from a particular fund, but it can be customised across funds picking…” a person aware of the deal said.

Chiratae’s majority exit from Lenskart came last year when it cashed out more than $100 million from the Gurgaon-based firm in a $500-million secondary round at the company which saw the entry of Abu Dhabi Investment Authority. Its remaining stake in Lenskart is still worth more than $150 million, according to sources.