Early-stage investment firm DSG Consumer Partners is set to launch its second fund with a corpus of $50 million (Rs 326 crore) to invest in India and Southeast Asia, a top executive told VCCircle.
The fund would aim to invest at least $40 million in India and the remaining overseas, said Deepak Shahdadpuri, founder and managing director. The fund’s investment strategy would be similar to DSG Consumer’s first fund, he said, indicating the new fund would also invest in sectors such as food and consumer.
DSG Consumer raised its first fund in December 2012 with a corpus of $20 million. It invested in 19 companies including mobile payment services provider Mswipe Technologies, sauces maker Veeba Foods, restaurant reservations and rating platform Eazydiner, personal coaching firm GOQii, frozen dried fruits and vegetables firm Saraf Food, and specialty cheese maker Exito Gourmet.
“The strategy for the second fund will remain the same. I go first as an investor in any company, build the company from scratch along with the entrepreneur and polish it over next 12-18 months,” said Shahdadpuri. He added that the firm will likely invest up to $10 million from the second fund in 2016 in new companies.
Besides, limited partners from the first fund are likely to invest between $10 million and $20 million into existing portfolio companies. “As and when there is a deal in the existing portfolio, my LPs have the option to put in money beyond the already committed capital,” he said.
Shahdadpuri is also involved in managing the existing portfolio of Beacon India Private Equity, which he set up in 2006 along with Brij Raj Singh and Alok Sama with a corpus of about $200 million. The Beacon fund doesn’t plan to raise any money in the future, he said.
Beacon India PE focused on consumer, infrastructure and financial services sectors. It invested in companies including Impresario Entertainment and Hospitality Pvt Ltd, non-banking finance company Indostar Capital, infrastructure services provider A2Z, construction company NCC Ltd and the National Stock Exchange. Last year, the fund partially exited its investment in NCC.
Shahdadpuri said his focus is on companies operating in sectors other than technology. “Consumer is one space where not many investors are ready to give the money to a person who wants to set up a new business,” he said.
Hotels and baby food are other sectors Shahdadpuri is interested in. “A lot of hotel rooms are not being used and there is an opportunity to improve yields… globally also, people are looking at this segment now,” he said.
DSG Consumer’s portfolio includes OYO Rooms, a branded budget hotels marketplace. The company raised $100 million from Japanese telecom and internet conglomerate SoftBank and existing investors in August this year when DSG Consumer partially exited.
Apart from the partial exit in Oyo Rooms, Shahdadpuri has fully exited mobile marketing and customer engagement platform ZipDial where DSG Consumer’s first fund had made an investment. The fund exited ZipDial when it was acquired by microblogging site Twitter in January this year.
Though Shahdadpuri wouldn’t reveal the financial details of the exits, industry executives familiar with the matter said DSG Consumer pocketed about three times its original investment price in ZipDial and 11 times return on its original investment in Oyo Rooms.
Not all of Shahdadpuri’s portfolio companies have proven to be a success. One such company is Indian Home Gourmet, which makes ethnic dips, chutneys and sauces. DSG Consumer invested in the company in early 2014 but it has not managed to grow its sales and volume substantially. Shahdadpuri said the company has good products but it lacked sales and distribution capabilities. “We are trying to rebuild the brand again,” he said. “These are part and parcel of an investor’s life.”