SAIF eyes safe bet here, plans $400m India fund

BENGALURU: SAIF Partners, an early investor in mobile payments and digital wallet player Paytm, has begun raising its third India-dedicated fund of about $350-400 million, according to two people aware of the move. These plans come a little over two years after it closed a previous fund and will take its assets under management to over $1 billion.

"They have already started the process and will (raise capital) primarily from the same investors, which are endowments in the USA," sources said. The new fund will make SAIF Partners one of the largest venture funds in India after Sequoia Capital, Accel India and Nexus Venture Partners all of which have over $1 billion in assets under management.

The fund raising process comes at a time when SAIF Partners could see its holding in Paytm balloon to an estimated $ 2 billion, making it the most lucrative early-stage bet in the Indian startup industry so far, as Japan's SoftBank closes an investment round in the Noida-based company.

SoftBank is expected to invest between $1.4 billion and $1.9 billion in Paytm which will value the company between $8-9 billion. "SAIF will make a partial exit on its nine-year old invest ment in Pa ytm as part of SoftBank's investment," said one of the people cited above. "SAIF Part ners has invested a total of $70 million in Paytm till now, and in terms of returns this will top Tiger Global's investment in Flipkart as well," the sources said. SAIF Partners did not reply to email queries.


New York-based Tiger Global Management has invested a little over $1 billion in India's largest online retailer Flipkart, and its stake after the latest round is worth approximately $3 billion.

Venture capital firms managed to raise a record amount of capital last year despite slowing investments and falling valuations. Led by local affiliates of Silicon Valley heavyweights, Sequoia Capital and Accel, venture funds dedicated to India raised $2.2 billion in 2016, up from $1.5 billion in the previous year, according to data from Venture Intelligence. IDG Ventures India made a final close of its $200-million third fund earlier this year, followed by Saama Capital mopping up $58 million for its third fund.

But what sets SAIF Partners apart is its ability to give returns in a market like India where exits have been hard to come by. It is estimated to have earned more than $400 million on its investments in India's largest online travel agency MakeMyTrip, reaping 16 times the money it put in when it completed the exit earlier this year.

"SAIF Partners is absolutely at the top when it comes to returning money to investors. Power law (80% of the returns come from 20% of the deals) doesn't work in India, but in their case it does," said Parag Dhol, managing partner at Inventus Capital. Some of the other investments by the fund include movie and events ticketing portal BookMyShow, baby care etailer FirstCry, online realty portal PropTiger, logistics startup Rivigo, and online food delivery venture Swiggy.

While early stage venture bets are its main focus, SAIF also invests about 20% of the corpus in public market transactions where it holds a stake in companies for a long period. The fund is led by managing partner Ravi Adusumalli, along with five managing directors Deepak Gaur, Mukul Arora, Vivek Mathur, Vishal Sood and Alok Goel. The firm has a portfolio of over 60 companies, with offices in Gurugram and Bengaluru.

VC investments fell by 21% to 405 startups while total capital invested fell by 28% to $1.4 billion in 2016 after record funding for startups in 2015. The total number of venture capital deals hit a three-year low in January-March quarter with just 68 new deals, down by 47%, while total investment was down 43% to $314 million as compared to the same period last year.