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Why is Avendus Capital behind most large e-commerce deals in India?

Moneycontrol charts the growth story of Avendus Capital and how it cracked the formula of most large digital investments in India, which includes a USD 80 million round in food tech firm Swiggy, this week.

June 08, 2017 / 06:03 PM IST
(From left): Avendus co-founders Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal.

(From left): Avendus co-founders Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal.

It was the year 2011. The Indian digital ecosystem had started to bloom. However, while the early stage investments in the sector was starting to pick up, not many growth stage funds were confident about India’s digital growth story.

Avendus Capital, a boutique investment firm started by investment bankers Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal (L-R inset above), steps into the picture.

Started in 1999, Avendus was almost a decade old in the business of investment banking. However digital commerce was a new game that it wanted to crack early on.

In the years that followed, Avendus emerged as the go-to destination for startups raising funds, looking for acquisitions or simply looking to exit a dwindling business.

The firm cracked deals for companies such as Swiggy, BookMyShow, TaxiForSure, Lenskart and Freecharge among dozens of others from 2011 till date.


Moneycontrol charts the growth story of Avendus Capital and how it cracked the formula of digital investments.

Banked on insights and research

Back in 2011, the firm was studying the digital ecosystem of India. It realised that there wasn’t sufficient data to back the on-ground growth happening in the segment.

Avendus realised there was a dire need to come up with a detailed report on the digital ecosystem of India.

It engaged with multiple companies, took help from local investors, did a lot of primary research and came up with over a 100-page report. The report, ‘India Goes Digital’ pegged the market at around USD 11.5 billion for 2016. This was a steep hike from the existing USD 800 million market, back then.

Avendus’ findings were met with steep criticism in the ecosystem. People doubted the high numbers. They construed that Avendus was in a self-prophesy mode.

The concerns were proven incorrect in the years to come as the prediction would turn out to be spot on. India’s online commerce market grossed USD 13 billion in 2016.

Meanwhile, post the release of the report in 2011, Avendus started identifying industry verticals.

It sent its teams to countries such as US and China to convince foreign investors to invest in India.

“In December 2013, the Series A, Series B, Series C financings started happening in India,” Karan Sharma, director and co-head of digital and tech vertical at Avendus Capital tells Moneycontrol in an interaction.

However, the ecosystem hit another roadblock. The late stage (beyond Series E) investors were absent from the digital ecosystem. Many did not have the appetite to invest large amounts in e-commerce firms at that stage.

We did not see a lot of growth in private equity investors getting warmed up to this opportunity of digital. So we did a very interesting closed room event, where we called top seven VCs in India…besides a select close group of 30 private equity investors,” explains Sharma.

VC firms such as Accel, Helion, and IDG Ventures participated in the meeting.

According to Sharma, the VCs talked about how they see the market going forward and the companies that they are currently investing in.

“Nothing came out of that event for the next three to four months. This was in December 2013, when the market had taken a plunge. But after 6-7 months we started seeing a lot of activity in the Indian ecosystem,” he said.

Big deals start to flow in after a lull

One of the first big e-commerce deal for Avendus Capital happened in 2012 when it helped the movie and event ticketing website BookMyShow raise capital from Accel Partners. The amount was USD 18 million, an impressive one by the standards of those days.

Soon it was followed by a big ticket acquisition of bus ticketing website RedBus by Ibibo Group for USD 135 million in 2013.

“Something like Redbus was not just about buying bus tickets online. Instead, the startup was driving the overall bus transportation industry itself because as the experience kept getting better, people started travelling more in these buses. Their trust grew higher,” said Sharma.

Thereafter, Avendus also assisted taxi aggregator TaxiForSure in raising a few rounds before getting them acquired by competitor Ola in 2015 for USD 200 million.

While during the first few years, e-commerce was largely about bringing the offline retail to online and was driving the growth through the incentives and discounting, these companies were doing something different.

According to Sharma, they were instead solving the real world problems.

Retail was a very big category where Avendus started working with companies such as Lenskart and FirstCry.

“At one level Flipkart was driving aggressive growth and they were really capturing the market with mobiles and electronics. Price incentivisation was a very good tool for consumers. A lot of other vertical categories including furniture, baby products, prescription eyewear, supply chain logistics - all these categories were highly unorganised,” said Sharma.

Avendus then started looking at online services. It worked with CarTrade and Swiggy, among others.

It also advised Jabong in its USD 70 million sale to Flipkart in 2016. It was said that the deal got plucked from under Snapdeal’s nose and was done in a speedy manner spanning just 72 hours.

Focus shifts to fintech from e-commerce

The focus for Avendus now is in the payments and fintech space. “We closed our 20th deal in payments and fin-tech space in March,” said Sharma referring to the sale of Mumbai’s TechProcess to France-based Ingenico Group.

“Anything that happens in payments we would be doing that,” Sharma stressed. He claims that Avendus Capital has achieved a rightful share in the growth of India’s digital story.

According to Sharma, in the last 2-3 years, Avendus has had a strong impact on digital startups by bringing growth equity capital to the country.

“For the last 2-3 years, we have been instrumental in scripting the success story,” says Sharma.

He claims that Avendus brought a lot of first-time investors in India. These include – Stripes Group and Valiant Capital.

“We did FirstCry and Freecharge in the same month. We also got Tybourne Capital to invest in Freecharge. Valiant had invested long back in India but it took them 6-7 years to come back again here,” he said.

He also said that Avendus had a role to play in bringing Chinese players such as ‘Byte Dance’ which led a USD 25 million funding round in content app Daily Hunt.

“We have been working a lot in bringing new pools of capital in the India market. Last year I was actually based in the US for over 2 months engaging with a lot of these investors who have never invested in India. I have been educating them about India growth story to get them not just for our clients but for the overall ecosystem,” explains Sharma, who joined the firm in 2011.

Avendus has advised on USD 6.4 billion worth of mergers and acquisitions and USD 4.5 billion worth of private equity transactions in the last ten years.

'India is in a construction stage’

Was it difficult to convince investors to invest in digital India story considering that the internet penetration is still nowhere close to how it is in the West?

“India is a country which is always under construction in every sector… there are roads being dug up, sewer lines put in, electricity line put in. Our underline sectors are growing so India is in a unique situation where the underline industry and digital is growing,” says Sharma.

“If there is no commerce for you to consume digitally then why would you pay for the bandwidth…it is like a chicken and egg situation,” he adds.

In the last almost half a decade, Avendus has also entered into segments such as wealth business structured credit and alternative asset management.

The firm that started its journey with four people in 1999 now has over 200 people. From closing four deals in the first 18 months of its existence in 2011, it has come a long way.

“People say that the financial year 2017 was a little bit of a challenging year but it was better for us as compared to FY16,” says Sharma, who just closed a USD 80 million transaction with Swiggy this week.
first published: Jun 2, 2017 07:06 pm

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