India's 3one4 seeks $200m for fourth VC fund

Pranav Pai, the firm’s co-founder and CEO, told Mergermarket, AVCJ’s sister title, that he expected up to 65% of the corpus to come from domestic investors, including corporates and conglomerates, financial institutions, and family offices. The balance will be raised overseas. This is in line with previous funds, all of which are rupee-denominated.

Existing local LPs include Reliance Industries, Hero Group, Tata Investment Corporation, HDFC, HDFC Bank, HDFC Life Insurance, State Bank of India, Kotak Mahindra Bank, and Axis Bank, as well as family offices such as Catamaran, Premji Invest, and DSP Investment Managers.

3one4 counts Emory Investment Management and The Dietrich Foundation among its overseas endowment and foundation cohort. It is also supported by corporates Sojitz Group and Krafton, from Japan and Korea, respectively, and by Nippon India Digital Innovation FoF and British International Investment.

Fund IV is expected to make 35 investments, writing equity cheques of USD 500,000 to USD 5m, Pai said. About 50% of the corpus will be earmarked for follow-on investments in existing portfolio companies. Co-investors could add another USD 5m-USD 25m to each deal, he added, noting that 3one4 has delivered USD 130m in co-investment to date.

Target areas include software-as-a-services, consumer internet, financial technology, digital health, deep-tech, and digital solutions for large corporates and small and medium-sized enterprises (SMEs).

3one4 has USD 700m in assets under management across five funds, with more than 80 active investments. It raised INR 1bn (then USD 16m) for its debut fund in 2016 and made 38 investments, of which 14 have been exited. The fund is running at a multiple of nearly 5x and an IRR of 38%-40%, in US dollar terms, Pai said.

Fund II, which closed on INR 2.5bn (then USD 40m) in 2018, has exited two out of 20 investments; the multiple and IRR are 6.5x and 62%-66%. This compares to 1.61x and 82% for Fund III, with two out of 39 positions exited.

Prior to launching Fund III, 3one4 raised a USD 60m top-up vehicle, known as Continuum I, which is now 80% deployed. There is also a seed fund, Rising I, which closed on USD 7m in 2018 and made 19 investments. Three have been exited. The multiple and IRR are 3.8x and 74%.

3one4 has made three exits so far this year, including Tracxn Technologies, which represents the firm’s first IPO. About two-thirds of 3one4’s exits have come via M&A with sales to other financial sponsors accounting for most of the rest.

Pai expects to see some bumper exits over the next three years, with IPOs accounting for around one-third of them in dollar value as unicorns such as fresh meat and seafood delivery player Licious and human resources SaaS business Darwinbox look to go public. He hopes to deliver 13 liquidity events between now and 2025.

Other 3one4 investees include podcasting and microblogging platforms KukuFM and Koo, SaaS providers Everstage, Growfin, and BetterPlace, financial technology players Open, IndiaGold, LoanTap, Raise Financial Services, and Jupiter, digital health apps Dozee and Breathe Well-Being, electric vehicle charging start-up Exponent Energy, and warehousing automation business Unbox Robotics.

Pai founded the firm with his brother Siddarth (pictured, left to right). Their father is T.V. Mohandas Pai, formerly a senior executive at Infosys.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Venture
• Technology
• GPs
• Fundraising
• India
• 3one4 Capital
• Fundraising
• TMT
• Fintech