Bangalore: Infosys Technologies Ltd founder-chairman N.R. Narayana Murthy’s $129 million (around Rs580 crore) venture capital (VC) fund,Catamaran Investment Pvt. Ltd, has invested in a 17-month-old firm that seeks to sell a lemon-flavoured energy drink that will compete with Red Bull.
Catamaran, along with Bangalore-based FootPrint Ventures and four angel investors, has invested a total of Rs6 crore in Gurgaon-based Hector Beverages Pvt. Ltd. Catamaran and FootPrint Ventures have invested Rs2.5 crore each in the company. The other investors contributed the rest.
The investment is Catamaran’s first in a start-up company. The VC firm has so far invested in companies, including India’s biggest provider of small loans, SKS Mircofinance Ltd, and education services provider Manipal Universal Learning Pvt. Ltd.
“We will look at early-, mezzanine- and late-stage investments,” said Catamaran’s investment head Arjun Narayan. “However, investing has to be a win-win situation for both investors and investees. Currently, we are seeing those kinds of opportunities more in very early and very late stage, and not so much in mezzanine.”
When it comes to start-ups, what matters to Catamaran is the market validation of the offering, team strength and capital efficiency of the business model, Narayan said.
“There are some sectors we don’t invest (in) at an early stage because we are concerned about achievability of scale and capital efficiency,” he said.
Hector Beverages, which has created the lemon-based energy drink Tzinga, plans to utilize the funds to expand production capacity and strengthen its distribution network.
The energy drink is being pitched in the same category as Red Bull, which is priced at Rs85 for a can of 250 millilitre (ml). Tzinga, on the other hand, will sell for Rs20 for a 200ml pack, said Neeraj Kakkar, chief executive and one of the three co-founders of the company.
“Earlier, functional beverages were negligible in the non-alcoholic, ready-to-drink segment; now, they are 40% of the market,” Kakkar said. “Our unique selling point is its Indian taste and affordable prices.”
Functional beverages refer to non-alcoholic, ready-to-drink beverages that have ingredients such as herbs or vitamins to provide extra health benefits. As a category, functional beverages include energy drinks, sports and performance drinks, enhanced fruit drinks, and water.
Tzinga will be initially sold in New Delhi and its suburbs, and Bangalore, where Hector Beverages has set up a distribution network, said Kakkar.
Catamaran will look at co-investing with other venture capitalists and angel investors in other start-up companies. Through co-investments, or syndicated deals, investors seek to share risks for backing a firm that is at its most vulnerable phase of growth.
Catamaran has so far looked at companies that broadly benefit from an increase in consumption in the world’s second fastest growing major economy. While Narayan refused to give any details about how many investments have been made by Catamaran, publicly disclosed investments include a pre-share sale investment in SKS Microfinance, Manipal Universal Learning, and Ace Creative Learning Pvt. Ltd that was founded in 1998.
For FootPrint Ventures, Rs2.5 crore is just the beginning of backing the firm for a longer term. The VC firm, which has invested in digital photography firm Canvera Digital Technologies Pvt. Ltd; Leaf Retail Pvt. Ltd, which runs the Mast Kalandar quick service chain of north Indian cuisine; and Educational Initiatives Pvt. Ltd, usually sets aside $5 million for every firm that it backs for their future needs.
“As an early-stage investor, we have to stick to the company to the very end,” said Josh Bornstein, partner at FootPrint Ventures. “If you don’t think properly, you can’t maintain the stake. These firms would need capital in future.”
FootPrint Ventures, which invests out of a global corpus, plans to invest in another company in India. “It is in the payments space. We are at the term-sheet level right now, and the deal may close next month,” said Bornstein, declining to give further details.