Deal focus: Opportunities at the end

Estimates vary as to the value of the treasure that sits in India-focused private equity funds that are running out of time. These are – in theory – willing sellers who need to return capital to LPs, but even if an investor identifies an individual secondary position, securing ownership of it is a more complex task involving multiple stakeholders. An edge always helps.

For secondary specialist TR Capital, that edge in two recent India deals was established relationships. This is most apparent in eyewear chain Lenskart, where the PE firm took out positions held by Unilazer Ventures and TPG Growth. Combined with its existing stake, these shares make TR the second largest shareholder after management with more than 10%.

“The company doesn’t need to raise additional capital, but two shareholders were looking for some liquidity,” says Paul Robine, CEO and founding partner of TR. “So rather than bring in new shareholders, the preference was to sell to an existing investor because it’s simpler in terms of due diligence and the founders were interested in TR increasing our stake based on our contribution over the last three years.”

TR – which commits up to $100 million per deal, but normally substantially lower than this for single asset deals – was happy to oblige based on Lenskart’s development. The company most recently raised a $60 million Series D round in 2016 led by the International Finance Corporation, while TPG led the Series C a year earlier. Unilazer first invested in 2013, but the last three years have been the most operationally striking. 

Having started as a pure online player, Lenskart adopted an online-to-offline model, taking its store network from 20 in 2014 to 378 today and becoming India’s second-largest eyewear retailer. The key premise is that users can download an app that takes a three-dimensional photo of their head and shoulders and then try out every design of spectacles they like in virtual reality. Final decisions, as well as in-the-flesh tests for fit, take place in a store on a later date.

“Offline and online retail should be considered parts of the same whole and complementary. They should not be separated anymore,” Robine adds. “The best illustration of this is Lenskart.”

The second company, microfinance specialist Arohan Financial Services, is also considered a strong prospect, with an IPO expected in the next 12 months. Impact investor Aavishkaar Venture Management acquired the struggling company in 2012 and turned it into a stable microfinance solutions and insurance provider with 435 branches. Tano Capital invested in 2015 and TR is facilitating partial exits for Aavishkaar and Tano by acquiring a 10.5% stake.

TR tracked the company and made its initial approach in June of last year. But its efforts were supported by the fact that it completed a restructuring of a Tano fund – not the one that made this investment – last year.   

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• Topics
• South Asia
• Technology
• Financials
• Secondaries
• India
• TMT
• Financial Services
• TR Capital
• TPG Capital
• Unilazer Ventures