WITH a bunch of investments under its belt, Sequoia Capital is betting big on Indian e-commerce; from Snapdeal and Olacabs to Oyo Rooms, the venture capital player is riding the digital boom. In the eight months to August, it has ploughed in $334 million across 43 deals, Venture Intelligence data shows. But it is multi-stage investment firm Tiger Global that leads the pack of investors having put in $366 million; with a commitment of $ 85 million, Accel India is at number three. Last year IFC had invested closed to a billion dollars: $906 million across 25 deals.
Clearly any business with a sound business model and a credible management is attracting capital and not just the disruptive new age technology-enabled companies. Sequoia is adding exposure to the pharma space with stakes in firms such as Akumentis Healthcare.
In a recent interview to Mint newspaper, Abhay Pandey, managing director at Sequoia Capital observed that several high quality people were moving out of big pharma firms and setting up their own meaningful and valuable businesses; his business, he said, was about going after entrepreneurs, targetting large markets and those who could build large valuable businesses with small amounts of capital. But e-commerce or any business based on digital technology has been a big draw too: from peer-to-peer (P2P) lending to consumer analytics, beauty shopping, hyperlocal delivery, consumer payments and home furnishing.
In April, Sequoia, Tiger Global and Accel together infused $400 million into online cabs aggregator Olacabs along with other investors. In the same month, Sequoia put in $250 million into Snapdeal and in July deployed $100 million in Oyo Rooms.
Sequoia’s ability to exit investments successfully is probably what makes it so aggressive, according to Sanjeev Krishan, who leads the PE practice at PricewaterhouseCoopers. Krishan says the focus on operations and the business model of investee companies along with the timing of exits has helped firms like Sequoia Capital create value for investors. “Sequoia Capital has been one of the most prolific and successful PE investors in India, and part of its success lies in being able to exit its investments at an opportune time,” he observes.
Tiger Global too has been very active with investments of $150 million in Quikr and $100 million in Saavn. Accel India counts Freshdesk ($50 million) and Swiggy.com ($16.5 million) among its top three investments; last year it had picked up stakes in Myntra and Proptiger Realty.
Mukul Singhal, principal at SAIF Partners believes the local services market—service providers that cater to particular neighbourhoods—is a huge opportunity given the market is unorganised and inefficient. “We are keenly evaluating opportunities in the area of local services. We will invest in businesses that tap into demand for services such as home solutions (like interior decoration), wedding solutions and beauticians at home,” Singhal said.
However, traditional private equity firms have not been aggressive investors in the e-commerce space. “We haven’t invested in the pure e-commerce segment. We are value driven investors, and the high valuations of pure e-commerce firms has been a challenge,” said Gopal Jain, managing partner, Gaja Capital. “It is mainly global
e-commerce investors including hedge funds active in the US and Chinese e-commerce space that are driving e-commerce valuations in India as well,” Jain noted.