Bangalore: SAP Ventures, the investment arm of German software firm SAP AG, invested in three Indian firms in 2008 with money from its parent company. It waited until this June to make its next investment in an Indian firm, Just Dial Pvt. Ltd, this time with money from its first fund of $355 million (Rs 1,594 crore) that it raised in January.
Jai Das, a managing director who leads SAP Ventures’ India activities, said the country is among the fund’s top three destinations, after the US and Europe. Edited excerpts:
What brought SAP Ventures to India the first time?
Globally, we have been investing for almost 15 years... the point of the fund was two things: One was to expose SAP to new business models, emerging trends and increasingly, also activity in emerging trends in emerging economies, and two, financial returns. We have been fairly active and we have had over 100 investments in almost five continents. In 2007 and 2008, we saw that India has become an increasingly critical area for SAP both in terms as a market and as a development centre and we were encouraged to go start looking for investment opportunities in India.
Is your India strategy different?
Globally, we have one unified strategy, which is mid- to late-stage investments. We are looking for companies with $8-10 million in revenues... because one of the key values that we bring for our portfolio companies is to leverage the whole SAP ecosystem... companies that are able to leverage the SAP ecosystem are typically mid- to late-stage because SAP customers typically want to work with companies that have revenues, that have actual customers... that is going to be the strategy in India as well.
Your investment pace in India is slow. Why is that?
There was a huge downturn in 2008-end and 2009 and globally, I don’t think anyone made a lot of investments. Second, we have been looking but sometimes you want to invest in companies and you lose out on deals. That has also happened. And the third thing that has happened is that we are looking for mid- to late-stage companies in IT (information technology) and ITeS (information technology-enabled services), and those kinds of companies were hard to find in the last three years.
Has the Indian market panned out the way you had anticipated?
When we started investing in 2007-08, our expectations, our ideas, were very different. Every market is unique in terms of emerging countries. There are some aspects of India which is very easy for us to get a grasp of. The language of business in India is all in English, so when I along with all my colleagues come here, we can spend time in due diligence and have no issues in interacting with entrepreneurs... But India also has its own unique flavour of doing things where certain infrastructure is not present. Databases of information are not present. And the way you go and get customers is very different.
What kind of corpus allocation is likely to come India’s way?
We have four portfolio companies in India and, hopefully, we will have a couple more by the end of the year. We don’t disclose publicly the invested capital in India but we believe that roughly 20% of the SAP Ventures’ $355 million fund will be invested in India...
Do your returns expectations from India differ?
For our fund, we have one IRR (internal rate of return) for the whole fund, so the financial metric is one, unified. We don’t have a separate kind of returns perspective for investment in India or investments in the US or Europe. But... the multiples that you get in the US, even though the economy is not growing as fast, are still a lot higher than the multiples that you get for companies in India.
A good example is MakeMyTrip, which is traded in the US. I am sure if it was traded in the Indian IPO (initial public offering) market, its valuation would be very different. In similar ways, M&A (mergers and acquisitions) multiples in India are a lot different. Though we don’t have different IRR perspective on India, we sometimes feel that maybe (Indian) companies are better off filing on the Nasdaq or the US stock exchanges because the premiums and the multiples that you get there are a lot higher...
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