Three years after it made its first investment in India, Bertelsmann India Investments (BII) has a deployment book of $150 million, having made 30 deals here.
“We made our first investment in 2013-end in India. If we include the commitments that we have lined up for the next 12 months for de als that we have an out look for, the deplo yment would be about $200 mil lion,” Pankaj Makkar, MD of Bertelsmann India Investments. “This is just for our follow-on investments and new deals will be over and above this,” he added. A growth stage strategic investment vehicle of Bertelsmann SE & Co KGaA, the company invests a part of the profit of its parent.
The fund typically invests in three to four new deals a year starting with Series-B and Series-C levels. “Series B is a great space to be in right now, because there is more demand than supply. That means we will, hopefully, get better deals and therefore end up building a good portfolio,” said Makkar.
Over the past two years the Indian venture capital ecosystem has been facing a sizeable shortage of capital for companies at the growth stage, making it easier for global funds and strategics, especially Chinese and Japanese, to make sizeable investments in these stages in India.
Some of Bertelsmann’s best bets in the Indian internet ecosystem include furniture marketplace Pepperfry, online lending platform Lendingkart, music streaming app Saavn, and budget hotel chain Treebo which raised Rs 226 crore ($34 million) in its Series-C round last week.
Although the initial euphoria surrounding Indian ecommerce has ebbed over the past two years, Makkar says the sector is very much on the radar for Bertelsmann as it chalks out its India strategy, with many pockets yet to be tapped into.
“We have seen (opportunities) in China and the US, where our sister funds have made investments in version 2 of ecommerce companies. We believe that will happen in India. Whether it is over the next 12 or 24 months, all of that will happen,” said Makkar.
Bertelsmann is also training its focus on fintech and edu-tech. Education joins healthcare as a sector that investors are slowly warming up to, given its potential to shore up sizeable returns over long periods of time.
As the strategic investment arm of Bertelsmann SE & Co. KGaA, BII however, will not look at media plays for strategic buy-outs from the fund with such initiatives being driven by the parent. “Yes, Bertelsmann is looking for strategic buyouts. However, it will not get done by the fund. The fund actually invests in areas where we don’t have strategic businesses in the country,” explains Makkar. “From that perspective, this fund is not a strategic acquisition vehicle for the group.”
For BII, its India portfolio gives it an extremely strong internal rate of return (IRR) between 30%-40%, according to Makkar. But with only three years of deal-making in the country, its first set of exits is still 12-24 months away.
Source: Economic Times