Will books-to-electronics etailer Flipkart close the deal to raise a reported $150-200 million before Christmas? Prashant Prakash and Subrata Mitra, partners at Accel Partners India, would probably hope so. News is that the Bangalore-based venture capital firm could be coasting towards a 25X return (25 times the original investment) on its 2009 investment in the ecommerce startup. It was the first venture capitalist to enter Flipkart with a $1 million investment. Sources close to the venture capital firm say that it wants to sell 2 per cent (may sell a little over 2 per cent) of its total undisclosed stake for a consideration of $25 million.
Accel did not respond to emailed queries. But if it does make the sale, Flipkart’s valuation will jump to well over the speculated $1 billion and Accel will become venture capital royalty in India.
Exits have been coming along at a steady trickle for venture capital investors in India. But few have breached even the 10X return multiple mark. A recent IDG Ventures India study found that overall venture capital returns in India between 2004 and 2010 have averaged at 5.1X. The study takes into account 142 known exits during this period. Out of this, the technology sector accounts for 100 exits. The average return multiple on technology exits has been 5.9X, finds the study.
Given the current exit environment, Accel’s 25X return from its imminent partial exit from Flipkart would set new performance benchmarks for the Indian venture capital industry. Media reports suggest that private equity firms General Atlantic and Carlyle are teaming up to infuse $150-200 million in the company. The two investors are expected to pick up minority stakes in the Bangalore-based ecommerce startup, say unconfirmed reports. This would be the company’s fourth round of funding. After Accel, private equity firm Tiger Global had invested $30 million over two tranches.
Speculation over the deal has mounted since July when VCCircle first reported that the etailer was in line for a $150 million round from General Atlantic. The company could certainly use the cash. Founders Sachin Bansal and Binny Bansal, former Amazon.com software developers, want to hit $1 billion in revenues by 2015 and are furiously broadening the site’s offerings from books to consumer electronics to music and the like. Books now account for account for less than half of its revenues, which were at $11.22 million in March. Revenues in the current financial year (ending March 2012) are projected at over $100 million. The bulk of its cost of operations is taken up by an extensive inventory management (warehouses) and customer service network — more than 60 per cent of its payments are by cash-on-delivery. It currently employs more than 2,500 people.
For Accel, the Flipkart exit will also ease the path to its second India-dedicated early stage fund. It reportedly plans to raise a $150 million corpus. If selling 2 per cent in Flipkart yields the desired $25 million, the venture capital firm would have returned nearly half of its $60 million Fund I, raised in 2008. Sources say that it has drawn only $33 million of the available corpus so far. The fund has invested in 25-odd companies including mobile value-added services startup Kirusa and fashion etailer Exclusively.
Prakash and Mitra could be counting down to a very merry Christmas.
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