After the successful Nasdaq listing by MakeMyTrip last month, venture capital (VC) firm SAIF Partners is gearing for two more initial public offers (IPOs) by its investee firms. But unlike many VCs, SAIF is not looking for an exit as it sees further growth opportunity. At present, it is investing from its fourth fund of $1.25 billion (Rs 5,818 crore), both in India and China.
In an interview, India Head Ravi Adusumalli tells Shivani Shinde the firm will focus more in the early stage segment. Edited excerpts:
Why didn’t you divest your holdings in MakeMyTrip? Will you look to exit other firms that go public?
We were one of the first investors in MakeMyTrip. Even after the IPO, we are the largest shareholders. We hold 43.79 per cent in the company though it has come down from 51.2 per cent. We are a long-term shareholder in the company and excited about its long-term prospects.
Similarly, One97 will go public in late September or October. We are not selling all our shares in the company.
We see growth in the company. The company can grow tremendously. Being a commerce provider, it sees a lot of growth in India today. Yet, another company which is growing is Just Dial. Having said this we have also made exits. We exited from Sify, IL&FS Investsmart and Thermax.
Saif has been investing in online commerce and mobile VAS (value-added services) firms. Don’t you think the sector is getting crowded in terms of investment from VCs?
Things have changed. When we started in India in 2002, we thought three to four years from then will be a relevant time period for these firms to garner market share. But it took a lot longer than we thought because of infrastructure issue.
But with WiMAX and spectrum auctions finally completed, what we thought earlier would be a reality in the next three to five years.
In terms of the sector, I think there is still room for scale. There are not enough companies with big scale. So, for us there is tremendous amount of growth in the market. Of course the issue is to find a high quality management team and back them. MakeMyTrip is an instance of this.
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You are also partnering at the seed fund level with One97 in their $100-million (Rs 465.5 crore) fund?
They are doing remarkably well and the team there is great. We thought of partnering with them as they are helping a lot of start-ups in the VAS segment. So, we have not invested the entire $100 million. I do agree that seed fund is much riskier, and that is why we are working with One97.
You said Saif will focus more in the early stage segment. Is this going to continue despite the correction in the public markets?
I think post-recession valuations are more reasonable in terms of mid- and early-stage investments. Late-stage market is very expensive right now. Public markets are pretty expensive as well. It is much more difficult to invest in late stage and public markets.
We are getting much more active at the early stage ventures. There is a much better investment climate. We are in the process of issuing term sheets to two firms. Besides, after the slowdown this segment has improved a lot, especially in terms of the quality of team and projects.