Sandalwood raising corpus to $500 mn; focus on growth deals

Sandalwood raising corpus to $500 mn; focus on growth deals

Mumbai: Bangalore-based Sandalwood Capital Partners, arm of the Santa Clara-headquartered venture capital (VC) investor Sandalwood Partners Lp, is increasing its corpus for investment in India from $120 million (Rs472.8 crore) to $500 million. Deal sizes will subsequently increase from $2-10 million, thus far, to up to $50 million; the firm is also expanding its focus to growth-stage firms.

The firm’s move to raise its corpus follows recent backing received from a “Middle Eastern investor, who wants to enter the India market through us", says Ajay Jalan, chief financial officer, Sandalwood Capital Partners. Jalan did not divulge the name of the investor, but said it would act as a limited partner (institutions which invest in venture capital firms).

Sandalwood is not the first VC in this market to expand into growth investments—earlier this month, Mumbai-based Matrix Partners India tripled its India corpus to $450 million. Bangalore-based Sequoia Capital India raised a $400 million growth fund last year.

Sandalwood focuses on cross-border investments in India and China, and invests in areas such as semiconductors, telecom, alternative energy and Internet. While the sector focus remains unchanged, it will now invest larger amounts in capital-intensive businesses such as semiconductors. It will also invest further in its existing portfolio companies—New Delhi-based semiconductor company SemIndia Inc. ($10 million), Mumbai-based telecom software company Xalted Information Systems Pvt. Ltd ($5 million) and optical electronics and telecom services company Arasor International Ltd ($2 million).

Arasor, a Mountain View, California-based company, has operations in India and China, and was listed on the Australian Stock Exchange in late 2006. Sandalwood wants to take SemIndia public by mid-2008, but did not specify if it would list on the domestic bourses or overseas. “We work very closely with our portfolio companies—we even worked with the government when the semiconductor policy was being drafted," says Jalan.

Sandalwood was founded by Bob Kondumari and V.R. Ranganath in October 2006. Both have significant experience investing in the semiconductor and software industry. Kondumari was earlier partner at Charter Venture Capital in Silicon Valley and has invested in companies such as Softcom Microsystems, Inc., which was acquired by Intel Corp. in 1999, and Ramp Networks, Inc., which was acquired by Nokia Oyj in 2001.

Ranganath was president of Alliance Venture Management, a $240 million US-based fund. He has invested in technology start-ups such as Platys Communications, which was acquired by Adaptec, Inc. in 2001 and Maverick Networks, Inc., acquired by Broadcom Corp. in 1999.