Chiratae Ventures Sells Multiple Portfolio Startup Stakes to Madison India for $70 Mn

SUMMARY

Chiratae Ventures' recent $70 million secondary sale to Madison India Capital showcases a deliberate effort to optimize its portfolio by divesting stakes in select portfolio companies.

This transaction reflects a growing inclination among Indian venture capitalists to explore secondary sales as an effective exit strategy, enabling them to unlock value from their investments and reallocate capital strategically.

With secondary transactions gaining momentum, this deal highlights a broader shift towards more cautious investment practices among VCs in India, signaling a maturation of the startup ecosystem and a heightened focus on generating returns amidst market uncertainties.

Bengaluru, India: Early-stage venture capital firm Chiratae Ventures has reportedly sold stakes in some of its portfolio companies to private equity firm Madison India Capital for $70 million in a secondary deal. This move comes amidst a broader trend of Indian VCs seeking exits and deploying more cautious investment strategies.

Portfolio Trimming for Chiratae

The companies involved in the sale include Lenskart, Bizongo, and Rentomojo, with Chiratae offloading shares acquired through its Fund II and III. These funds were smaller in size, making the $70 million exit a significant return, according to sources quoted in The Economic Times. Chiratae did not respond to queries for comment at the time of reporting.

Secondary Sales Gaining Traction

Chiratae's divestment reflects a growing trend of Indian venture capitalists exploring secondary sales as an exit strategy. This approach allows them to partially offload holdings in their portfolio companies, freeing up capital for new investments. Similar instances include discussions by investors in e-commerce giant Meesho to divest their stake and US-based investors in Eruditus seeking an exit during the company's $150 million fundraising round.

Chiratae's Prior Exit and Madison's Secondary Expertise

This is not Chiratae's first foray into secondary transactions. In 2022, the VC firm participated in eyewear leader Lenskart's $400 million funding round led by Abu Dhabi Investment Authority (ADIA), effectively exiting its majority stake.

For Madison India Capital, this deal represents their second instance of acquiring startups through secondary purchases. In 2017, the firm acquired eight portfolio companies from Peak XV (formerly Sequoia Capital) for $180 million. Backed by Lexington Partners, a specialist in secondary transactions, Madison India Capital has companies like Pine Labs, Gupshup, and CarDekho in its existing portfolio. With this latest acquisition, they add Lenskart, Rentomojo, and Bizongo to their roster.

Cautious Approach by VCs in India

Chiratae's move underscores a cautious approach emerging among Indian venture capitalists. The initial exuberance for startups has given way to a focus on securing returns on investments. Slow returns in the past year have prompted VCs to adopt more prudent investment strategies.

Secondary Sales: A Viable Option

Secondary sales offer VCs a path to make partial exits from their portfolios, potentially generating returns and freeing up capital for new ventures. This trend is expected to gain further traction as VCs navigate the evolving Indian startup landscape.

Looking Ahead

The Chiratae-Madison deal signifies a growing acceptance of secondary sales in the Indian VC ecosystem. As investors navigate a more cautious environment, secondary transactions are likely to play a significant role in portfolio management and exit strategies for VCs in India.