When Carlyle, the private equity fund with $221.5 billion of assets under management, along with Tiger Global wrote a $100 million cheque for Delhivery in 2017, it stunned many in the startup ecosystem. Carlyle, one of the largest private equity funds globally, is known for its razor-sharp focus on profitability. Yet here it was backing Delhivery, a logistics tech company with losses of Rs 631 crore ($88.2 million) in the year ended March 2017. And while its losses grew to Rs 684 crore ($95.6 million) in the following fiscal, Carlyle topped up its investment by participating in a $395 million round in March this year.

To put this in perspective, one need only look at some of Carlyle’s earlier investments. Like in 2006, when it invested in Allsec Technologies, a business process outsourcing firm. At the time, Allsec was small but already profitable. It was a similar story in 2014 when Carlyle invested in Newgen KnowledgeWorks Private Limited, a provider of publishing and technical services for publishers. Newgen was clocking a PAT (profit after tax) of Rs 34 crore ($4.75 million) when Carlyle acquired a majority stake in it for $32.8 million. Its non-tech investments were also made in companies of a certain size. India Infoline, for example, had a loan book of $778 million in 2011 when Carlyle invested in it.

The Carlyle-Delhivery equation is one of several examples of how the traditional rules of private equity investing are being rewritten. Large, bulge bracket private equity funds who previously wouldn’t give high-growth, high-burn internet businesses a second glance, are now flocking to such companies.

General Atlantic—another big private equity player—has invested close to Rs 232 crore ($32.4 million) in edtech platform Byju’s so far, beginning in 2018. This isn’t new for General Atlantic, per se. It’s the same PE fund that invested Rs 620 crore ($86.7 million) in health tech company CitiusTech as early as 2014. But there’s a difference between the two companies. While Citius Tech was already profitable, with a profit of Rs 98 crore ($13.7 million) in the year ended March 2014, Byju’s losses stood at Rs 29 crore ($4.05 million) for the year ended March 2018.

“Private equity funds have observed the hockey stick growth that internet businesses have seen and they don’t want to miss out on the opportunity. The upside in these companies is far higher than in traditional industries”

Sudhir Sethi, founder and chairman of Chiratae Ventures

As per company research platform Venture Intelligence, the number of deals involving private equity investment in tech startups has risen year on year. In 2017—when Carlyle first backed Delhivery, there were 68 such deals. In 2018, this number went up to 98.



Vandana is based in Delhi. She covers vertically focussed startups in consumer internet space and also writes on travel tech and smartphones for The Ken. She has spent 13 years in journalism covering a wide range of subjects- equity markets, mutual funds to education and skilling, working at organisations such as Business Standard, CNBC TV18 and The Week in the past.

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