Early-stage venture capital firm India Quotient, which first invested in ShareChat in 2015 through its second fund, has made a quick part exit from the Bengaluru-based vernacular social networking platform with high returns.
The fund has taken out Rs 50 crore after selling 1-2% stake in ShareChat in a secondary share sale, Prerna Bhutani, a partner at India Quotient told VCCircle. This has given the fund a multiple on invested capital of around 32 times, she added.
The venture fund still holds 5% in the company worth Rs 170 crore.
Bhutani did not reveal the internal rate of return (IRR) earned by the fund from this part exit but said that the second fund IRR stands at more than 100%. According to VCCircle estimates, though, India Quotient clocked an IRR of 200% from this partial exit. Private equity and venture capital firms typically chase an IRR of 20-30% in rupee terms.
India Quotient’s stake was picked by Hillhouse Capital, a Beijing- and Hong Kong-based investment firm, which made news recently when it closed its new private equity fund at a whopping $10.6 billion. The investment firm is an investor in top Chinese technology companies such as Tencent and Baidu.
This transaction was part of ShareChat’s fresh funding round in September when it raised Rs 720.29 crore led by existing investor Shunwei Capital. While Shunwei put in Rs 236.54 crore ($32.5 million), Hong Kong-based Morningside Ventures invested Rs 180.72 crore ($25 million), accounting for the second largest contribution, the company's filings with the Registrar of Companies showed. Existing investors Xiaomi ($16.83 million), Lightspeed Partners ($15.2 million), SAIF Partners, Venture Highway and an unidentified Cayman Islands-based fund accounted for the remaining capital.
According to back-of-the-envelope estimates by VCCircle, ShareChat raised this round at an estimated post-money valuation of about Rs 3,332.14 crore ($458.49 million). This indicates a seven-fold rise in valuation from its previous funding round.
Bhutani explained that the reasons for the quick part exit were completely internal and investor-led. “We believe this is the time to buy more into the company and hold on as it has now started breaking out,” she said.
She also said that there are good exit opportunities being created in the Indian ecosystem now, both through secondary transactions and mergers and acquisitions. “So we're optimistic,” she added.
India Quotient investments
Earlier this year, India Quotient marked the first close of its third fund at $30 million (Rs 195 crore), which is much bigger than the combined value of all its previous funds. The VC firm had raised $5 million for its first fund in 2012 and $18 million for its second fund in 2015.
Bhutani said that the final close of the third fund will be done “soon”.
The new fund will continue to focus on consumer businesses, financial technology and social networking. It intends to invest more in consumer brands, thanks to the jump in its ticket size. It also expects to explore new models in health-tech and logistics.
India Quotient was founded by Anand Lunia and Madhukar Sinha. Lunia is the former chief financial officer of VC firm Seedfund, while Sinha was a senior investment manager at impact investor Aavishkaar Fund. Later, Bhutani and Gagan Goyal, both entrepreneurs, joined as partners at India Quotient.
Its recent investments include Simply Vyapar Apps, a Bengaluru-based startup that runs an accounting and inventory management platform for small businesses; and Coolberg Beverages, a non-alcoholic beer maker.