Dubai: For India’s startups, the UAE and Gulf are the go-to places for expansion – and raise new funds, if possible. That is the script two of India’s unicorns are planning to follow.
“UAE and the Gulf have lots of capital and - now - they are definitely investing in India,” said Sujeet Kumar, co-founder of Udaan, a Bengaluru-based company that is an online platform for retailers and India’s ‘kirana’ shops. “Instead of selling to the consumer, we sell to retailers - the products are listed by manufacturers who sell directly to shops, restaurants and offices.”
Udaan has its own supply chain logistics and credit facilities to buyers. “We have a platform called Udaan Capital through which we give them working capital financing,” said Kumar.
Anchored to India - for now
Udaan, which is planning an IPO, will “concentrate on India for the next 2-3 years because there’s a lot of room to grow there,” said Kumar. “We haven't thought beyond India; our investments will mostly be going towards strengthening the infrastructure and automating more warehouses. Most of it will be technological investments.”
Udaan currently manages 10 million square feet of space across its warehouses and may need 100 million square feet in the next 7-8 years. It is 'expand or perish' for Udaan as competition heats up in the space. E-commerce giants such as Amazon, Walmart and Reliance dominate the business-to-customer segment and they are constantly looking for new growth avenues.
“Still, in B2B e-commerce, we have more than 70-80 per cent of marketshare,” said Kumar.
Kumar founded Udaan in 2016 with Vaibhav Gupta and Amod Malviya, both former senior executives at the e-tailer Flipkart. Prior to Udaan, Kumar was operations head at Flipkart where he built the supply chain and logistics. “We were the founders of the startup ecosystem [with Flipkart], because in 2007 there was nothing in India and from there we have reached a place where India has produced 35-40 unicorns this year alone,” said Kumar.
Kumar is also an investor in Tanglin Venture Partners, a Singapore-based venture capital fund, also backed by Flipkart CEO Kalyan Krishnamurthy. Plans are on to open an office in Dubai.
Meanwhile, asset management firm True Beacon allows foreigners and non-resident Indians (NRIs) to invest in India. “Up until now, they were routing their money through Singapore or Mauritius and entering India through feeder funds – we are trying to eliminate that and bring them (funds) directly into the country,” said Nikhil Kamath, co-founder at True Beacon.
GIFT (Gujarat International Finance Tec-City) City is an attractive proposition for investors looking to enter the Indian market. “It's a more tax efficient jurisdiction where you don't need things like PAN cards - the Indian government is trying to attract capital directly,” said Kamath. “In Dubai, we are hoping to get a new kind of clientele that would like to take advantage of this.”
Like a mutual fund
“Think of us as a mutual fund for ultra-high networth individuals – we run long/short funds, which are hedged perpetually,” said Kamath. “We don't have any management fees whatsoever, whereas our peer companies have about 2 per cent. Instead, we have a 10 per cent carry and that kind of makes it very client-aligned.”
Last month, India’s Commerce Minister Piyush Goyal said that a comprehensive economic partnership agreement with the UAE would be finalised before the end of 2021. A potential deal could result in investments in a range of sectors, including infrastructure and logistics.
Kamath, who was part of talks related to an India-UAE-Israel trade corridor, said the deals will boost trade and investments eventually. “They (trade deals) are a long drawn thing, people start talking about them, then drafting them,” he said. “It is definitely a step in the right direction”
Kamath, one of India's youngest billionaires, is the co-founder of Zerodha, the country's largest trading brokerage. He began trading at 17 years after dropping out of school, founded Zerodha with his brother Nithin Kamath in 2010. Zerodha has over 7.5 million clients, making it the largest brokerage in the country.
Kamath also founded the venture capital fund, ‘Rainmatter’, which invests in fintech companies that promote financial inclusion. In 2019, True Beacon was co-founded by Kamath and Richard Pattle, who once worked as an aide to Prince Charles.