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Bengaluru: Dragon Fund, which has backed prominent Indian startups including Meesho and Zepto, will ramp up its pace of investments in India and is likely to deploy more than half of its $500 million global fund it raised in 2023 by the end of this year, a top executive told Mint.
“India will undoubtedly be one of our largest markets. We are significantly ramping up our investment activity from our current fund and we hope to maintain the same pace where we do at least one to two deals every quarter and India is going to be a very big part of it,” 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 raise its next fund with a larger corpus size.
Other global investors including Pantheon and Harbour Vest have also expressed optimism about ramping up investments in India, joining a growing line of investment firms turning their attention to the country owing to its robust economic prospects. Earlier this year, the two investment firms anchored private equity firm Chrys Capital’s $700-million continuation fund alongside a third investor, LGT Capital Partners.
Meanwhile, Dragon’s current fund, which has a global mandate, has a steady pipeline of investable companies in areas such as Southeast Asia, Australia and New Zealand.
“Outside of 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 tech-enabled mid-to-late-stage growth and pre-IPO companies in sectors including e-commerce, consumer tech, enterprise tech, and health-tech.
As a subset of Mars Growth Capital, Dragon Fund was started with the premise of filling the space in growth stage funding in private markets post the pandemic. Last month, the investment firm participated in Indian quick commerce startup Zepto’s $340 million fundraise with a $50 million cheque at a valuation of about $5 billion.
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The lure of India
Dragon’s funds will target companies with good unit economics and a fixed path to profitability. With an average first cheque size of $50-75 million, its investments will be a mix of fresh capital into companies as well as follow-up rounds.
“The idea is to double down on those companies that have the appetite to take more capital,” Chaudhary said. She added that Dragon Fund has flexibility in terms of primary and secondary transactions and typically aims to take a minority stake of up to 20% or less, depending on a deal’s contours.
In the past few months, the fund has already deployed nearly half of its capital across five investments, including two in India. Dragon expects to make another 10-15 investments from the current fund. While the fund has a global mandate, it will prioritize business models that have an Asia-first approach.
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Much 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 with several new-age companies tapping the public equity markets.
“Exit has become less of a concern when investing in India today as more options have opened up. That has made us more confident as liquidity in the market has improved, and even from a macroeconomic and geopolitical perspective, India is positioned quite favourably,” Chaudhary said.
Investors have also alluded to India’s diverse talent being a key differentiator as compared with that of other countries.
Bain India’s venture capital report also emphasized on improving exit activity in the country. Last year, exits surged by almost 1.7x to reach $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 increased in value, primarily driven by mega exits in consumer tech such as Flipkart and Lenskart, Bain added in its report.
Also read | Accel eyes partial exits from multiple early investments
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