SAIF Partners, the private equity (PE) firm that has assets of $1 billion under management in India, has made certain investments in disruptive technologies, which have gone on to do well. Some of its investments include Paytm, MakeMyTrip, Justdial and BookMyShow. On Monday, SAIF Partners announced that it had invested $1 million in Aye Finance, which lends to micro, small and medium enterprises. In an interview with Neha Bothra, managing director Vishal Sood says that contrary to popular perception, SAIF Partners was not exiting its holding in Manpasand Beverages, one of its portfolio companies valued at around R1,000 crore. Also, the PE firm will look for further investment opportunities in niche financial services companies and smartphone-based technology firms. Edited excerpts:
What was the thesis for investing in Aye Finance?
We have invested in two other lending platforms — Edelweiss and Karur Vyasa Bank. Both of them are lenders to medium and large enterprises. We have been studying the sector and realised there is a very big under-served market of small companies that need working capital or finance for other business purposes. But they are not able to get access to banks or NBFCs. Aye Finance is one of the companies that is filling this gap. They provide loans to companies that have a turnover of less than R1 crore and have to presently borrow from informal moneylenders at very high rates. Our thesis here was that a company which is able to understand, evaluate correctly and lend to these small companies that have capital requirements but not access, then maybe it is a good business opportunity for us, while serving those in need of capital better.
How long do you intend to remain invested in Aye Finance?
This is a relatively smaller company engaged in the lending business. So it takes time to scale the business as you open new branches and spread to new cities. Usually, for this kind of business we expect it to take around five to seven years at least.
Could you share some details about your 2015 investment plans?
We have a $350-million fund and we have invested less than 10% of it. We expect to maintain the pace of our past investments. When we invest at a seed stage in a company, we expect it will grow over time and we will be investing more money in the same company, like we have done in the past. All this investment comes from the same fund. Two years from now, you may find that we have no seed investment because all the companies we have already invested in have become big.
What are the other business opportunities that you are evaluating at present?
There are a lot of existing businesses that now have access to the latest technology. There are many interesting technologies and business models that are coming up. So, some of them will be new companies and some of them will be existing business models becoming more efficient and capable of serving customers better by using these technologies, especially smartphones. While I cannot predict what will be the next disruptive thing, it is likely going to be technology-enabled and most likely going to be smartphone-based.
In terms of potential exits, any update on Manpasand Beverages?
The company is raising capital for further growth and has filed a draft red herring porspectus with the Securities and Exchange Board of India for a public issue. Though the company is going public, we are not exiting Manpasand Beverages.
