Deal focus: Atomberg basks in consumer breakthrough

Indian home appliances maker Atomberg had to wait four years for its first round of external funding. Sibabrata Das and Manoj Meena, who established the company in 2012 after graduating from the Indian Institute of Technology – Mumbai (IIT), are credited for having the courage of their convictions.

“I've followed their journey very closely. For the first five years, they struggled because Indian investors did not believe that a start-up could build a hardware-focused consumer brand. It's amazing how they've proved everyone wrong. The founders had an immense belief in their motor technology and what they are doing with it,” said Arpit Beri, a principal at Jungle Ventures.

Jungle led a USD 20m investment in 2021 that also featured Inflexor Ventures and A91 Partners. This was Atomberg’s fourth funding round, according to AVCJ Research. Beri knew Das and Meena from IIT and came close to investing in 2018. When Jungle did pull the trigger three years later, it was on the back of a period of 10x revenue growth that confirmed the success of the company’s earlier pivot.

The prior three funding rounds, totalling approximately USD 20m were provided by the likes of Parampara Capital, IDFC, Whiteboard Capital, Survam Partners, A91, Trifecta Capital, and the Gogri family, which founded speciality chemicals business Aarti Industries.

More recently, Atomberg has significantly scaled up its capacity with a USD 86m Series C led by Steadview Capital and Singapore’s Temasek Holdings. There were re-ups from Jungle, Inflexor, and Trifecta, while several investors – A91 and the Gogri family among them – made partial exits.

Strong demand from incoming investors limited the number of secondary shares that could be included in the round and no one got in at a discount, despite prevailing market conditions. Atomberg is now valued at approximately USD 400m, more than double the level of the previous round, which closed in 2021, according to a source close to the situation.

Atomberg is best known for its electric motor fans, but it started out as a business-facing manufacturer. Its website describes the initial post-2012 period as “a blur of high-end technical products that went to prestigious clients.” Those clients included the Defence Research & Development Organisation, Bhabha Atomic Research Centre, and IIT-Mumbai.

Around 2015, Atomberg pivoted to the consumer-facing segment, having noted little change in home appliances made in India despite significant strides made overseas.

Brushless direct current electric motor (BLDC) fans proved to be the company’s breakthrough product and it now claims to be a market leader in the segment. The Atomberg offering was less noisy and used less electricity than the competition, and came with remote-controlled power, speed, and LED lighting.

“The functionality of the fan materially changed because of the technology that they used. The value proposition became very differentiated compared to the existing fans in the market. Additionally, it made economic sense. One of the key selling points was a 30%-50% reduction in power consumption,” said Sandeep Bapat, a partner at Trifecta.

Trifecta provided venture debt funding to Atomberg in 2020. Its most recent investment is much larger and structured as equity. Bapat noted that Trifecta’s debt and equity investments are managed independently of each other.

Investors highlight not only Atomberg’s technology but also its brand-building capabilities. The company became the number one seller on Amazon in India – the country’s leading online shopping platform – which greatly improved its visibility. However, this online growth was matched by efforts offline. Atomberg built a strong brick-and-mortar network and is now present in about 15,000 stores.

“In India, it's very hard for a new consumer brand to establish offline distribution channels, but Atomberg’s product differentiation is so strong that they have been able to do it,” said Bapat. This move was essential to the company becoming one of India’s top-five fan manufacturers, given more than 70% of fan sales transacted offline.

From fans, Atomberg expanded into blenders – leveraging the same motor technology used in its core products – and smart locks. Revenue has grown 100% year-on-year over the past 12 months and Das told local media that he wants to reach INR 10bn (USD 121m) in revenue and turn profitable in the 2024 financial year.

“With every brand, once they have created strong brand recognition, they launch many peripheral products. A smart lock doesn't use the same motor technology, but they want to get into home IoT [internet of things], which embraces all home electronic appliances,” said Jungle’s Beri.

All Atomberg’s manufacturing takes place in-house, leveraging a full supply chain established close to Mumbai. In this sense, investors view the company as part of a broader evolution in Indian manufacturing, notably a transition from final assembly to component manufacturing.

The government has played a role in this, having launched various programmes intended to promote self-sufficiency and reduce reliance on imports, including the 'Made in India' initiative. Incentives linked to localised production and exports are readily available.

Moreover, India is benefiting from the supply chain diversification drive pursued by global brands in response to US-China tensions. The country's share of global iPhone manufacturing is still in the single digits, but it reportedly tripled in the 2023 financial year as Apple’s contract manufacturers like Foxconn Technology Group and Pegatron Corp expanded local operations.

“More overseas companies are trying to set up supply chain and manufacturing operations in India,” said Bapat, explaining why early-stage investors are increasingly tracking hardware start-ups. “Additionally, the Indian government is pushing local companies to establish supply chain ecosystems in-country for various reasons, including national security considerations.”

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• Topics
• South Asia
• Industrials
• Consumer
• Expansion
• India
• manufacturing
• Steadview Capital
• Temasek Holdings
• Jungle Ventures
• Trifecta
• Growth capital