Chiratae Ventures closes Rs 1001 cr fund: Here's why the 17-year-old VC believe now is the ideal time for growth investments

Homegrown venture capital fund Chiratae Ventures has forayed into growth investments after nearly two decades of existence with its maiden growth fund ‘Chiratae Growth Fund (CGF-I)’. The fund, closed at Rs 1001 crore, was oversubscribed by 34 per cent from its initial target of Rs 750 crore.

In an interaction with Business Today, Venkatesh Peddi, Managing Director of the fund said the firm's portfolio companies have raised over a billion dollars in the past two years and the growth fund will help the firm expand its investment capabilities to pursue these opportunities.

“We have always supported our portfolio companies, which have grown beyond a certain point, in their growth rounds, to the extent possible. We realized that as companies grow, there are more and more opportunities for us to deploy in the growth stages, in our companies and outside, which we may or may not be able to do just with our existing funds. So, we went to our existing LPs (limited partners) and the outside LPs to showcase the opportunity and we are very excited with the overwhelming response we have got,” Peddi said.

Several of Chiratae's existing LPs have invested in the growth fund including Pratithi (Family Office of Kris Gopalakrishnan, the Co-Founder of Infosys), 57 Stars (a global alternative asset manager) and Manish Choksi (Vice Chairman and non-executive board member of Asian Paints) and his Family Office besides a set of new investors such as State Bank of India, India Infoline Limited (IIFL), Axis Bank and others.

Chiratae Ventures believes that the present market conditions are favorable for growth investments as companies are prioritizing profitability and are open to rational valuations in growth rounds.

“Like a lot of investors, we also feel that because there is a slowdown in the growth investment side and an ongoing correction in the valuation, it would be a great opportunity, from a timing perspective, to deploy (funds) in fundamentally good companies, at ‘fundamentally strong valuations’. We feel it could be win-win for our LPs who are investing in the growth fund and for the companies which are raising funds,” he said.

The growth fund aims to create a portfolio of 10-15 companies, with ticket sizes ranging from $5-15 million. About 75 per cent of the growth fund will be deployed in its portfolio firms.

Peddi said that although Chiratae Ventures had previously invested in growth opportunities through a small percentage of their early-stage fund, CGF-I will mark its foray into growth investments and there will be multiple growth funds in future. CGF-I made its first investment in March with a Rs 100 core contribution in its portfolio company Lenskart’s $500 million funding.

“It (CGF-1) does foray our stepping into the growth investments. But while we take those steps, we're also looking at deploying a portion of the growth fund in our existing portfolio. Also, there are a lot of companies in the ecosystem which we are familiar with, and we will try and take such new logos where there is a very high amount of familiarity. And we feel that it is an opportune time for us to get into the growth stage,” Peddi said.

The growth fund will invest in companies that have reached Series C or beyond which are on a trajectory towards profitability or are already profitable. These investments will be selected based on their potential to offer a profitable exit within the next five to six years.

“A lot of companies are very well placed; they feel happy that there is such a period (of slow down) where they can focus on fundamentally building strong team, retain the talent and don’t have to worry about the chaos in the markets. They are putting their heads down and executing. Our idea of the growth fund is to identify such companies within portfolio and outside and use that to invest in companies at reasonable valuations. We have learned from the past that in such down cycles, companies which are able to do that will go on to become large companies,” he added.

Peddi said the pace of deployment at Chiratae has remained relatively stable over the years despite the slowdown, with the firm typically deploying between $90 to $130 million a year. Although 2021 saw deployment at the higher end of this range, Peddi expects deployment in 2022 to be around the $100 million mark.

Bengaluru-based fund, formerly known as IDG Ventures India, has $1.1 billion in AUM across its six funds, with over 130 investments, 48 exits including 3 IPOs, and eight Unicorns among its portfolio. Chiratae Ventures has been an early backer of technology-led companies such as Bizongo, Curefit, Fibe, Firstcry, Lenskart, Myntra, PolicyBazaar, Pixis, Vayana, and Uniphore. The company claims to have a track record of having returned capital to the investors in each of the last 12 years.

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