Flipkart co-founder Sachin Bansal, who made a personal fortune of close to $1 billion after selling the online retailer to Walmart last year, has found a new calling in debt deals.
On Monday, Bansal invested ₹20 crore in debt in online grocery and milk delivery startup Milkbasket, the latest in a series of debt deals that he has entered into since exiting Flipkart.
The small size of the deal notwithstanding, the transaction underlines a distinct pattern in Bansal’s investments, which are seemingly focused on debt and thereby on capital protection. In contrast, many of his peers in India’s startup sector, who have similarly cashed out, have pursued equity investments.
The investment in Milkbasket marks Bansal’s fifth debt deal in the past two months, even as he considers more such investments in India’s booming venture debt and financial services space.
Mint first reported on 25 February that he had invested ₹250 crore each in debt in two non-banking financial companies (NBFCs), Altico Capital India Ltd and IndoStar Capital Finance Ltd. Bansal’s investments in Altico and IndoStar came at a time when non-banks, including NBFCs and home financiers, were facing a liquidity crisis triggered by a series of defaults at Infrastructure Leasing and Financial Services, starting in September last year.
Mint also reported on 29 February that Bansal was planning to double down on the financial services sector and make a big play in the venture debt space.
Bansal may allocate several hundred crores of rupees for venture debt deals and look to route his investments through his newly formed holding company, BAC Acquisitions Pvt. Ltd, which he launched with the help of investment banker Ankit Agarwal.
Bansal also invested $3 million each in debt in two startups last month—scooter-sharing startups Vogo and Bounce. A detailed questionnaire sent to Bansal went unanswered.
Bansal’s debt play could be seen as an attempt to diversify his bets from the early equity investments he made as an angel investor over the years. Debt is traditionally a source of stable but lower returns, unlike venture capital, where returns can be astronomical but are far riskier.
India’s venture debt market currently has only three institutional investors—InnoVen, Alteria and Trifecta Capital.
Alteria and Trifecta are currently raising a ₹1,000 crore first fund and a ₹750 crore second fund, respectively.
“There is a growing realization on the potential of venture debt. It is a good way to get strong yields in a dislocated asset class when the broader fixed income market is going through uncertainties," said Vinod Murali, co-founder and managing partner at Alteria Capital.
Bansal, one of India’s first consumer internet entrepreneurs, could also see more deal flow because of his deep networks in the ecosystem.
“Having relationships in the venture ecosystem is crucial for identification of good opportunities, but it is equally important to be able to underwrite and collect well," added Murali.
According to investors, Bansal’s interest also underscores a wider growth in venture debt, as more investors and larger funds come in.
However, while giving money to an under-penetrated market is easier, the challenge lies in collection on time, and ensuring consistently good returns.
“There is a huge runway for venture debt growth in India, given the relative 3-4% composition of total venture financing compared to 14-15% in the US, and given the lack of financing options for startups and traditional lenders," said Ankur Pahwa, partner and national leader (e-commerce and consumer internet) at EY.
“Debt will certainly make a meaningful impact for startup founders to raise capital, especially for an efficient capital structure and improved returns on capital," added Pahwa.
Bansal, 37, has been actively looking to deploy the fortune he earned when he sold his 5.5-6% stake in Flipkart to Walmart, with Flipkart valued at $22 billion.
Since then, besides the debt deals, he has invested $100 million in Ola, and has held discussions to invest $50-10 million in electric vehicle maker Ather Energy.
His investment in Ola was seen a move to strengthen its board and broaden its investor base, as founder and chief executive officer Bhavish Aggarwal fights to keep control of the company without ceding ground to Japan’s SoftBank, which offered to invest $1 billion twice in the last two years.