Bengaluru: Dragon Fund, which has backed prominent Indian startups including Meesho and Zepto, will accelerate its pace of investments in India and is likely to deploy more than half of its $500 million global fund it raised in 2023 for of this year. a senior executive told Mint.
“India will undoubtedly be one of our largest markets. “We are significantly increasing our investment activity from our current fund and we hope to maintain the same pace where we do at least one or two deals every quarter and India will be a very important part of that,” said Dragon Fund’s chief investment officer. Ridhi Chaudhary told Mint in an interview.
Backed by Japan’s largest bank, Mitsubishi UFJ Financial Group (MUFG), Dragon Fund is the equity financing arm of Mars Growth Capital, which has launched several debt funds. The investment firm is also in talks to create its next fund with a larger corpus.
Other global investors, including Pantheon and Harbor Vest, have also expressed optimism about rising investments in India, joining a growing line of investment firms turning their attention to the country due to its strong economic prospects. Earlier this year, the two investment firms founded a private equity firm Chrys Capital $700M Continuation Fund along with a third investor, LGT Capital Partners.
Meanwhile, Dragon’s current fund, which has a global mandate, has a steady portfolio of investable companies in areas such as Southeast Asia, Australia and New Zealand.
“Outside Asia, we are also selectively evaluating opportunities in SaaS (software as a service) and fintech given the global nature of these verticals,” Chaudhary said.
Dragon Fund also focuses on other technology-enabled mid- and late-stage growth companies and pre-IPO companies in sectors including e-commerce, consumer technology, enterprise technology and health technology.
As a subset of Mars Growth Capital, Dragon Fund was started with the premise of filling the gap in growth stage financing in the private markets post-pandemic. Last month, the investment firm participated in Indian fast trading startup Zepto’s $340 million fundraising with a $50 million check at a valuation of around $5 billion.
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The appeal of India
Dragon’s funds will focus on companies with good unit economics and a set path to profitability. With an average first check size of between $50 million and $75 million, your investments will be a combination of fresh capital in companies and follow-on rounds.
“The idea is to double down on those companies that have the appetite to acquire more capital,” Chaudhary said. He added that Dragon Fund has flexibility in terms of primary and secondary transactions and typically aims to acquire a minority stake of up to 20%. or less, depending on the contours of the agreement.
In recent months, the fund has already deployed almost half of its capital in five investments, two of them in India. Dragon expects to make another 10-15 investments with the current fund. While the fund has a global mandate, it will prioritize business models that have an Asia-centric focus.
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Like other global investment firms, Dragon Fund places great importance on India’s maturing startup ecosystem and appetite for sustainable growth. Exit avenues for selling investor stakes have also improved and several new-age companies have flocked to the public stock markets.
“Exit has become less of a concern when investing in India today as more options have opened up. This has made us more confident as liquidity in the market has improved, and even from a macroeconomic and geopolitical perspective, India is in a quite favorable position,” Chaudhary said.
Investors have also alluded to India’s diverse talent being a key differentiator compared to that of other countries.
The Bain India venture capital report also emphasized improving exit activity in the country. Last year, outflows increased nearly 1.7 times to $6.6 billion as investors sought to provide liquidity to their investors, known as limited partners, in a high interest rate environment.
Stake sales to other investors and strategic deals also rose in value, driven primarily by mega exits in consumer technology such as Flipkart and Lenskart, Bain added in its report.
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