'Should we shortchange our investors by exiting early?'
InfoEdge Founder and Executive Vice Chairman Sanjeev Bikhchandani says his company has invested only Rs 1,500 crore (Rs 15 billion) in start-ups in the past 14 years, has not ignored its operating businesses and deploys only a handful of employees for running the venture capital business.
"The capital deployed by the company at cost, in investments, has been only Rs 1,500 crore in the past 14 years. It is not that we have invested a lot, it is just that we have had two blockbuster outcomes in Zomato and Policy Bazaar in which we have invested for over decades. So it looks like a lot. We also have Rs 4,000 crore (Rs 4 billion) in the bank," he said.
Bikhchandani was responding to concerns raised publicly by some experts that it should sell more of its Zomato stake (which, with Policy Bazaar, went through an IPO which is being traded at a hefty premium of the offer price) so that it could generate more risk capital.
This, the argument went, could be used for other successful ventures rather than InfoEdge becoming merely an ETF (Exchange Traded Fund) for Zomato.
In an open letter, Venkat Subramanian, MD of Infina Finance, has asked Bikhchandani to reduce its stake in Zomato and de-risk the company.
In response, Bikhchandani said he took all feedback seriously but the real issue was different.
"The real issue is that we have enough risk capital if we believe in the management and its 10-year growth story. Also, the shares of Zomato and Policy Bazaar are locked in till July and October-November respectively. Whether we will exit or not exit, the board will decide. It has not been discussed as there is a lock in."
But his own personal bias, he added, is that both companies have a great long-term growth story.
"Should we shortchange our investors by exiting early? Maybe. I don't know."
Bikhchandani said over 4,500 people work for InfoEdge and all but 10 are involved in the operating business with another 8-10 in the investing business.
"Naukri is a dominant leader in the business and it had a great quarter. Matrimony.com is number three and we are working on it as it continues to be a challenge and is losing money. We have made a few acquisitions too, but there are no big blockbusters and we have acquired them at prices which make sense," he said.
InfoEdge scrutinises over 1,000 potential start-ups every quarter, he said, eventually choosing only two or three in which to invest through its venture capital fund.
Besides, Indian start-ups require 'patient capital' to grow their business and build scale.
"Start-ups need a decade or more to build their business and if you have a short-term horizon to exit in 6-8 years, you put firms under pressure and they make awkward decisions or you exit early and make no money," he said.
One example is Zomato which saw its value go up only in the last three years (ninth to eleventh year).
Bikhchandani's Rs 750 crore (Rs 7,5 billion) VC fund is structured to take a long-term view.
That's why it has a tenure of 12 plus two years, the country's only fund with such a long tenure.
It has bought in only two global limited partners such as Temasek which also believe in long term commitment as well as the Indian story.
"The money we have put in is from our balance sheet and not from someone to which it has to be returned. The fund will look at newer areas like electric vehicles and renewables," he said.
Elaborating on his strategy, Bikhchandani said the fund generally prefers to be the investors who offer the first institutional cheque to a start-up, that is, it wants an entry at an early stage.
It likes to invest in the next two to three rounds too. It also has a clause for a board seat in the start-up, irrespective of whether it chooses to exercise the option or not.
Feature Presentation: Aslam Hunani/Rediff.com
