SIDBI, or the Small Industries Development Bank of India, was set up in 1990 by the Indian government. Its objective was to help micro, small and medium enterprises through direct and indirect lending. It also has seven subsidiary companies, one of which is the SIDBI Venture Capital.

On 20 April The Economic Times reported that Mumbai-headquartered ‘food tech’ company Holachef raised Rs 32 crore from SIDBI VC and existing investor Kalaari. The investment is intriguing. In rounds Sidbi has participated in, it typically invests anywhere between Rs 3-5 crore. With some exceptions.

Holachef is now one of those exceptions. Because SIDBI invested Rs 13 crore in it.

Food tech as a sector has faded over the years. According to data and research company Tracxn, the sector has been on a downward trajectory. The amount of money raised by companies in the sector fell by over half, from $260 million in 2015 to around $125 million in 2016. And in 2016, most of the companies that got funding were established players or those that needed a bridge round to survive. Interest was definitely waning. The gold rush was over. So has SIDBI seemingly gotten on the end of the greater fool theory?

HolaChef’s filings at the Registrar of Companies state that it made Rs 10.9 crore in operational revenue in FY16 with a loss of Rs 25 crore. It also has an additional Rs 6 crore in debt, which was raised from InnoVen Capital.

The financials

HolaChef’s filings at the Registrar of Companies state that it made Rs 10.9 crore in operational revenue in FY16 with a loss of Rs 25 crore weighing down its books. It also has a Rs 6 crore debt, which was raised from InnoVen Capital

“It is strange. I will admit,” says Ajeet Khurana, an angel investor from Mumbai and former CEO of Sine, IIT-Bombay’s incubator. “There are two possible reasons: either it’s going to be acquired, and this money pads it up or it’s very close to profitability.”

Up until a few months ago, HolaChef was struggling. It, according to former employees, was struggling to pay salaries. Fundraising was the only priority. But raising money from its existing investorsKalaari Capital and India Quotient (IQ)was stuck too. SIDBI came to the rescue.

Another angel investor who recently helped his company raise a round of funding with SIDBI added that the investment was strange.

“When we dealt with SIDBI, it insisted that the company has to clock a revenue less than Rs 25 crore and be on the path to making money. It was very bureaucratic. It is more meticulous than a regular venture investor. And it wanted strong metrics,” he says.

AUTHOR

Patanjali Pahwa

Patanjali has spent over seven years in journalism. He last worked at Business Standard as Principal Correspondent, where he wrote on startups, e-commerce companies and venture capital. He has worked at an array of institutions, which include Forbes India, Caravan and Outlook Business. He is a Mumbaikar, born and brought up. Patanjali did his BSc in IT from Mumbai University and then got his journalism degree from IIJNM in Bangalore. He is enamoured by Ernest Hemingway and Tom Waits and may try to sneak in references to them in his stories.

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