BENGALURU: Walmart’s $16-billion acquisition of Flipkart set up investors in India’s largest online retailer for one of the biggest paydays in the world. But only one investor from India, besides Flipkart’s founders and employees, is set to make sizeable capital from the deal: the family office of Wipro chairman and India’s third-richest man, Azim Premji.
PremjiInvest will make more than $130 million on its $25 million (Rs 155 crore) investment in Myntra in early 2014, according to two people briefed on the matter. “(PremjiInvest) had given Myntra a term-sheet at the end of 2013 and invested in it by 2014. They were one of the only players willing to take the risk at that time,” said an investor who was a part of the discussions at the time.
A few weeks after the investment, Flipkart acquired Myntra in a stock transaction. At that time, Flipkart was valued at about $1.6 billion. By 2015, its worth had exponentially increased to about $15.2 billion. PremjiInvest manages at least $3 billion of assets predominantly in public markets, making it by far the largest family office in the country, as ET reported in January. The firm has a runway to increase assets under management to $6 billion.
PremjiInvest declined comment.
Investors say Premji-Invest stands out because of the frequency and size of its investments.
“PremjiInvest is an exception in this entire game. They are looked at as a fund and not a family office as they do large cheques. Their approach has been more early-growth private equity investor than a venture capital investor,” said Karan Sharma, co-head of the digital and tech vertical at investment bank Avendus Capital. Even so, while Premji-Invest has been able to consistently make profitable bets in areas like financial services, in retail, it has a mixed record. The firm in 2008 invested ?230 crore in discount retailer Subhiksha, which shut a few months later due to financial mismanagement. But its investments in retail chains Future Lifestyle Fashion and FabIndia have worked out well.
Soon after backing Myntra, PremjiInvest picked up a stake in Snapdeal for Rs 152 crore, the deal valuing the online marketplace at nearly $1 billion. Snapdeal’s worth peaked at $6.5 billion in 2016 but last year it sought a merger with Flipkart at a valuation of $1billion.
PremjiInvest also owns stakes in online eyewear retailer Lenskart and financial services platform Policybazaar, which is expected to be worth at least $1billion following an investment from SoftBank. PremjiInvest’s successful run with Flipkart, via Myntra, indicates that while there is risk in late-stage tech investments, there is also potential for rewards in equal measure.
Among global investors set to earn significant returns from the Flipkart-Walmart deal are mutual funds T Rowe Price and Morgan Stanley; Silicon Valley-based multi-family office Iconiq Capital, which counts Facebook’s Mark Zuckerberg as a key client; and Microsoft cofounder Paul Allen’s Vulcan Capital.
Pension and retirement plans for engineers in Ohio and teachers in Arkansas, and companies including Xerox, Shell and Dell also held small shares in Flipkart.
As for Indian investors, Flipkart cofounder Sachin Bansal is expected to make $1 billion by selling his entire stake in the company. And Flipkart employees, both past and present, are expected to make up to $500 million through their employee stock ownership plans, or ESOPs.
The Flipkart-Walmart deal is a real validation of the Indian startup story where “global smart money” is taking a huge bet on India and shows that Indian entrepreneurs can outcompete their global peers, according to Tarun Davda, managing director at Matrix Partners India.
But it also shows that the market will be dominated by American and Chinese strategic investors, which will either have direct operations in India or large stakes in local companies. One of the key reasons for this is a lack of local capital besides short-sighted policies, said several players in the Indian startup ecosystem.
“Today, our ecosystem lacks large pools of domestic capital chasing high-growth startups. Hence, latestage financings are dominated by Chinese and American strategics. As an ecosystem, we can do a lot more to ensure that more Indian startups are able to scale independently and go for an IPO. That is when we will get our own version of a BAT (Baidu, Alibaba, Tencent) of China or FANG (Facebook, Amazon, Netflix, Google) of the US,” said Davda, whose firm has backed ridehailing platform Ola and online classifieds Quikr.