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US private equity (PE) firm General Atlantic hopes to make its first investment in an Indian software-as-a-service (SaaS) firm this year, as it focuses on investing in and assisting startups that have the potential to be valued at more than $10 billion and even $100 billion.

“We are quite excited about SaaS companies and anticipate it will be a major theme for us in 2022," said General Atlantic managing director Sandeep Naik, who is also the firm’s head for India and South-East Asia.

However, he did not disclose the names of potential investments.

“Similar to how IT (information technology) services and business process outsourcing (BPO) companies created value in India over the past couple of decades, we believe SaaS companies will do that at a faster clip in the next decade," he added.

General Atlantic has invested $4.5 billion till date in India. It has several unicorns in its portfolio, including edtech firms Byju’s and Unacademy, Acko General Insurance, broking platform NoBroker and the National Stock Exchange. In 2020, it also picked up stakes in Jio Platforms Ltd and Reliance Retail Ventures.

Naik, however, is thinking well beyond creating unicorns, startups valued at over $1 billion. “We are focusing on building the next decacorns and centacorns," he said. Decacorns are valued at over $10 billion and centacorns at over $100 billion.

“We are focusing on Bharat—unless you solve the needs of the core of the market, you cannot create a decacorn or a centacorn," he said.

Some of General Atlantic’s portfolio companies such as Byju’s, the NSE, Reliance Retail and Jio Platforms are already valued at over $10 billion.

“Indian SaaS companies can create at least $300-500 billion of shareholder value over the next 7-10 years," he said.

General Atlantic joins investors Tiger Global, Accel Partners, Sequoia Capital and SoftBank Group in its interest in the Indian SaaS segment.

According to a Bain & Co. report released in December, the Indian SaaS landscape is maturing rapidly, with the number of SaaS firms doubling, and more than 60 SaaS firms having received Series C and above funding over the past five years.

The report added that investments in Indian SaaS rose to $4.5 billion in 2021, an increase of 170% from 2020, with growth driven primarily by an increase in over $50 million deals. Tiger Global and Sequoia Capital have been among the dominant investors in this segment, according to the report.

“Over the last 18 months, the SaaS companies we have seen coming out of India are effectively competing on the global stage with highly innovative, first-of-a-kind solutions. They have some of the highest capital efficiency because software talent in India is significantly more affordable than hiring elsewhere," Naik said.

The PE firm is also scouting for investments in segments such as direct-to-consumer (D2C) brands and healthtech, financial services and edtech, which are underpinned by the “inclusion theme". “We are looking at D2C brands as another theme. Digital-first brands are growing on the FMCG (fast-moving consumer goods) and personal care side," Naik said.

“Offline distribution, which was a strong moat for incumbent companies, has been disrupted by digital access to the consumer—we are looking at backing some D2C consumer brands in this category, including some companies in the beauty space," he added.

Indian beauty firms had a dream run in 2021, marked by the listing of beauty products startup Nykaa, which valued it at over $13 billion when it listed.

General Atlantic is also scouting for companies that can solve affordability and accessibility issues, Naik said.

“Access and affordability are the key vectors across these three sectors and we want to back companies solving this difficult problem using tech as an enabler—healthtech, fintech and edtech companies," Naik said.

“We might see in certain segments like edtech or healthtech that the biggest global companies may come from India. If the regulations change and the government allows a direct listing... for some companies that have global aspirations that is also an option," he added.

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