SAIF Partners’ Mukul Singhal on Inkfruit-Zovi

Last Friday, SAIF Partners portfolio companies Inkfruit (Fingerprints Fashions) and Zovi (Robemall Apparels) announced a merger that creates one of the strongest private label ecommerce players in the country. SAIF Partners, a private equity investor that plays in early stage and growth deals, has invested a combined $35.5 million in the two companies over multiple stages and owns a controlling stake in the combined entity. We chatted with Mukul Singhal who leads early stage investments at SAIF Partners, for his perspective on the merger. Edited excerpts from the interview:

1. Tell us how this merger makes sense for you as an investor.

If you look at the overall private label ecommerce space, it is still early days and no player has a clear lead. When we entered Inkfruit it was a different business (custom T-shirts based on crowdsourced designs). Then the company pivoted and expanded into a wider range of products. Some time into our investments both in Inkfruit and Zovi, we realized that there were several overlaps and complementary skills. It did not make sense for us to have capital invested in two similar businesses. And this is a business that requires big capital. This (merger) presented an opportunity to create a market leader while the gap in the private label ecommerce space still exists.

2. Inkfruit was in the market to raise a $10 mn round. Would you have participated in that round?

Yes we would have definitely participated in the round if they have been able to find a good, strong investor. We’ve always backed our portfolio companies over multiple rounds. We did invest follow-on rounds in Inkfruit last year (SAIF Partners invested $7 million in 2012 over a couple of tranches).

3. Not much has been disclosed on the terms of the merger. Is there a stock swap involved?

There is obviously a stock swap involved. Both the Inkfruit founders will hold some equity in the combined entity. In a scenario like this you would like to retain the intellectual property and you can only do that if there is an equity incentive. Both Kashyap (Dalal) and Navneet (Rai) will join the combined entity as co-founders.

4. What has changed in the past 12 months in the private label ecommerce niche? What kind of challenges do you anticipate for the merged entity?

The big change that we’ve seen in the private label ecommerce space is that market adoption has grown significantly. As we see it, any ecommerce player, private label or otherwise, has certain pertinent problems to crack. The first is technology and product. This has a direct bearing on market adoption. We think that Zovi-Inkfruit has done a good job already on that front. For instance, Zovi has started offering something called Zovi Eye, which is essentially a custom tool that aids the customer in making buying decisions. This obviously aids the adoption part. The second problem is logistics and delivery. Again, Zovi-Inkfruit runs its own delivery network in 17 cities and that has resulted in very efficient turnaround of orders. The third big challenge is sourcing and this is particularly pertinent in the case of private label brands. Here we think that Zovi-Inkfruit needs to push the envelope a little more. Inkfruit has a very strong back-end, supply chain operation and coupled with their co-creation model, which allows them to source unique designs from external designers, the combined entity will be able to squeeze more efficiencies into the sourcing operations.

5. What advantage does a private label player have over other players in the branded apparel segment?

In the general branded products segment, where inventory is being sourced from offline brands, the backend cost structure for an ecommerce company in that segment is pretty much the same as that of an offline retailer. You have very little control on the sourcing cost of the product. However, in the private label space, you are sourcing and manufacturing your own product and over time overall cost efficiencies can be achieved. An online-only private label brand can then pass on that cost benefit to the consumer.

6. When you incubated Zovi you inducted three founders. One has left. Was that a surprise?

It was not unexpected. Incubation comes with that risk and we were not surprised. The original founder team at Zovi had Satish Mani (former senior vice president technology at Cleartrip), Kavindra Mishra and Sartaj Mehta (both from Benetton India). Satish and Kavindra are still part of the founder team (Sartaj Mehta moved out last October to join Wills Lifestyle).

7. What is your exit horizon on the Zovi-Inkfruit investment?

It is difficult to say anything at this point on an exit horizon. If I were very optimistic I would put it at five years. But more realistically it would probably be 7-8 years. This has been the case with most of our other investments in the portfolio.

8. How has 2012 been for you in terms of overall dealmaking?

In 2012 we went a little slow on the early stage front. We participated in a Series A round in PropTiger, with Accel Partners. We invested follow-on rounds in Inkfruit and committed follow-on funds to Zovi with Tiger Global. The $10 million round in Zovi that was announced last week was actually committed late last year.

9. Will this mood continue in 2013?

Yes this is the pace and strategy that will continue more or less in 2013. We will invest at the Series A stage but will probably look for more co-investment deals. That’s the preference. On the Series B front we will probably become more aggressive this year because there are fewer players investing right now at that stage and therefore the valuations will be better.

10. Why has dealmaking slowed down? What kind of sectors/ opportunities will you look at in 2013?

There is some pressure on dealmaking because the exit environment has turned a bit negative. In terms of sectors, you will probably see fewer ecommerce deals, except for follow-on rounds. The macro trend in ecommerce is consolidation and you will probably see more of that happening this year. Otherwise, we’ll stick to the fundamentals by and large. Technology and media opportunities remain the overall focus for us.

Read more on the Inkfruit-Zovi merger:


  1. Shalini says:

    The last remark says it. More consolidation in ecommerce coming up. Time for companies to buck up.

  2. ramesh t says:

    Inkfruit got 10 mn dollars and still had to merge. What did they do with the money? Saif had no choice

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