Venture capital-backed Yatra, Newgen begin IPO groundwork

Venture capital (VC)-funded firms, including Yatra.com, Newgen Software Technologies Ltd and Centre for Sight, are considering initial public offerings (IPOs) and have started the groundwork for possible listings in 2015-16, according to multiple investment bankers who have met the firms.

“We would possibly see IPOs of companies which have reached scale and size and not the smaller ones. Traditionally, overseas listings have done well for VC funds, especially, for the technology companies,” said Raja Lahiri, a partner at consulting firm Grant Thornton India Llp. “

VC funds have witnessed good returns through some these listings and also companies are able to tap a wider pool of investors,” he added.

Yatra Online Pvt. Ltd, which runs the online travel firm Yatra.com, is among those considering a share sale and has initiated meetings with investment bankers, said two investment bankers who have met the firm. In April 2014, the firm raised Rs.140 crore in a funding round led by IDG Ventures. Earlier, in April 2011, the firm raised Rs.200 crore from investors including Valiant Capital Management, Norwest Venture Partners and Intel Capital.

Yatra did not respond to multiple emails sent to the company.

Delhi-based software services company Newgen Software is also looking to raise Rs.450-500 crore from an IPO, said one of the two investment bankers quoted above.

A third banker confirmed the development. In February 2014, Newgen raised around Rs.100 crore from IDG Ventures and private equity firm Ascent Capital for an undisclosed amount.

An email sent to NewGen Software went unanswered.

“In the IDG Ventures portfolio we have a number of companies that can launch an IPO in the next two years. Two prominent ones include Newgen and Yatra. Newgen is slated to bring an IPO on the Indian stock market and Yatra on Nasdaq. Both have achieved rapid growth, leadership positions and scale and a highly differentiated offering in the market,” said Sudhir Sethi, founder and chairman of IDG Ventures India.

Sethi declined to offer details of the IPOs.

IDG Ventures has committed more than Rs.1,000 crore across 50 companies since 1998. Some of its investee companies include Flipkart.com, Firstcry.com and Lenskart.com.

According to Karthik Reddy, managing partner at Blume Ventures, VCs looking at IPO exits points to the fact that they have been able to expand their portfolio companies to a stage where they are ready to enter the public markets.

“It shows the signs of an industry segment maturing and being able to demonstrate company’s performance that will eventually lead to healthy revenues and cash flows,” said Reddy.

Ashish Gupta, senior managing director at Helion Venture Partners, adds that VC investments made in 2006-07 are maturing and portfolio companies may be ready to go public.

“VC funds invested in many companies in 2006-07 and it is natural that after 7-8 years, many of those companies have become large enough to go public. Prior to 2006-07, much fewer companies got funded as the venture industry was much smaller..,” said Gupta, adding that a few of Helion’s portfolio companies were also planning to go public. He declined to share details.

Delhi-based specialty eye care hospital chain Centre For Sight has also initiated talks with bankers for a possible initial public offering (IPO) to raise Rs.250-300 crore, according to two investment bankers who have met with the company.

The IPO is being considered as a way to fund expansion plans and also provide a part exit to existing investor Matrix Partners India.

In 2010, venture capital investment firm Matrix Partners had invested Rs.50 crore in the firm. Matrix made a second round of investment in Centre For Sight in 2013, when it invested $5 million (nearly Rs.30 crore).

In an emailed response on 11 March, Mahipal Sachdev, founder and chairman of Centre for Sight, said, “While we appreciate your interest in Centre for Sight, I would wish to submit that the questions are premature and not an accurate reflection of facts. We shall keep you posted as and when we have finalised our course of action.”

“There is nothing finalised yet so this is premature,” said Avnish Bajaj, managing director at Matrix Partners, in an emailed response on 10 March.

To be sure, not every firm backed by early-stage VC investors will find its way to the mainstream capital markets, given that a number of these firms, especially in segments like e-commerce, may not be profitable.

In an attempt to provide them an option, the markets regulator on Monday released a discussion paper on an alternative capital raising platform to provide easier exit options to investors like angel investors and venture capital funds.

“VCs preparing their portfolio companies to take them public stems from the fact that the public markets are doing well and it provides an exit opportunity for them in India. Also with newer norms expected in this space, VCs will more keenly look at capital market listing,” said Sunil Jain, founder of Sprout Capital Advisors, a mid-market investment bank.

The article appeared in Mint. The article can be found here.