The part stake sale, expected across companies like Ola, business-to-business commerce company OfBusiness, fintech firm Razorpay and local language content app Dailyhunt, could fetch the firm around $150-180 million, they said.
“There have been talks between Z47 and other funds for a portfolio sale transaction as demand for secondaries has been on the rise over the past year, especially among the late-stage companies,” a person privy to the development said.
The development comes a few months after Matrix Partners India split from its US partnership and rebranded as Z47 amid a wider reset in the VC industry.
In June 2023, Sequoia US split from its India and China units, with the local unit being rebranded as Peak XV Partners.
Z47 had last year announced the final close of its latest Fund IV at $550 million, the largest corpus it has raised for the country since starting operations here in 2006.
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The Mumbai-based fund may explore going back into the market to rack up a new fund next year as Z47, people cited above said.When contacted by ET, Avnish Bajaj, founder and managing director of Z47, did not comment on the story.
ETtechAiming for secondary deals
Among its largest exits in recent years, Z47 has pulled out around $300 million from non-banking finance company Five Star Finance, which listed in the public markets in November 2022, besides selling partial stakes in OfBusiness, Dailyhunt, and the Bhavish Aggarwal-led mobility startup Ola.
ET reported on April 5 that Chiratae Ventures – one of the country’s oldest early-stage funds that has invested in companies such as Lenskart, FirstCry and Policybazaar – sold stakes in some of its portfolio firms to Madison India Capital for $70 million.
In the last five years, $7.7 billion has been transacted through private secondary markets, as per data shared by Gurgaon-based Oister Global and Silicon Valley fund Tribe Capital India, which have partnered to launch a new fund focused on secondary transactions.
As the need to demonstrate better DPI (distributed to paid-in capital) increases among venture funds, more such secondary portfolio sales will be seen.
Distributed to paid-in capital (DPI) is a term used to measure the total capital that a fund has returned to its investors, in this case LPs, against their total investment.
Such secondary portfolio sales, like the one being facilitated by Z47, work when VCs club a basket of companies – good and bad – to make it an attractive proposition for the incoming investor.
With liquidity pressure hitting the Indian venture capital industry after the euphoria of 2021 funding, VCs are exploring all options to distribute cash to limited partners (LPs or sponsors in funds).
In a recent interview with ET, Bajaj said LPs have not given up on India. “While India has disappointed as liquidity continues to be a problem, company performance has shown up in a lot of cases post Covid. LPs are starting to expect India to deliver as companies go public,” the Z47 head said.
Talking about the 18-year performance for Matrix India, he said, “The quartile and the performance versus our peers, I would think is as good or as bad. It’s been disappointing only on one metric, which is liquidity… I am hoping that over the next two years from now, if you ask me this question and if I have the same answer, I won’t be here.”
Z47’s big bet, Ola Electric, listed on the stock exchanges on August 9, and surged more than 80% in the first two weeks, but has since pared its gains.
On Monday, Ola Electric’s market capitalisation slipped below $5 billion following a public spat between Aggarwal and stand-up comedian Kunal Kamra over the electric two-wheeler maker’s service quality.