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DSG Consumer Partners achieves final close of $40 million for second fund

LiveMint logoLiveMint 26-02-2017 Swaraj Singh Dhanjal

Mumbai: Deepak Shahdadpuri-led investment firm DSG Consumer Partners (DSGCP) has achieved a final close of $40 million for its second fund DSGCP II.

DSG Consumer Partners, which is one of the first funds in the country to focus exclusively on the consumer space, has invested in firms such as payments firm Mswipe, specialty food ingredients maker Veeba Foods, greek yogurt maker Epigamia, online budget accommodation portal Oyo Rooms and tea chain Chai Point.

The firm raised its first fund DSGCP I in December 2012. DSGCP I invested a total of $24 million in a portfolio comprising 21 companies.

The second fund, which was launched last year, hit a first close of $35 million last April.

“We will deploy the fund across 20 investments and we expect to complete the deployment by middle of next year,” Shahdadpuri, also the founder of the fund, said in an interview.

The second fund has already committed $8.3 million in nine companies across India and South-East Asia, including Raw Pressery, Epigamia Yogurts, Salad Stop and Tazzo Bikes.

The early-stage consumer-focused investment firm has already reaped a good harvest by selling part of its stake in its investments from the first fund. The firm has sold stakes in firms such as Oyo Rooms, Zipdial, Veeba Foods, and Redmart.

From DSGCP I, the firm has completely exited its position in Zipdial. The firm has made part exits from its portfolio companies Oyo Rooms and Veeba Foods.

“We are very focused on giving liquidity to our LPs (limited partners) and we take money off the table quite regularly. OYO, Zipdial and Veeba exits were all at a very healthy multiple to our cost and validated our strategy to our investors,” said Shahdadpuri.

Its exit in Zipdial fetched the company 3.3 times the amount it invested, while the part exits in OYO and Veeba saw the firm generate returns to the tune of 11 and 6.5 times, respectively, according to a Mint analysis.

Through its exits, the first fund has already realized $11 million from the original $12.5 million raised and has returned around $6.3 million to investors, with the balance being used to invest in the future rounds of portfolio companies.

Apart from being a consumer-focused firm, a major aspect that differentiates DSGCP from others is its lean structure. In fact, in the first fund, Shahdadpuri was the only investment professional.

According to Shahdadpuri, the unique structure of the firm was a strategic choice.

“It was clear to me that to succeed at this stage, it was important to have the ability and flexibility to take investment decisions based on relatively limited data. Given our focus on doing very early-stage deals, and that too in sectors that are still nascent, a large part of the investment decision is based on taking a view on how a particular market can evolve and how we can help with that evolution. There is a large element of what people term as a ‘gut call’. I did not want to have to pitch to an IC (investment committee) which needs to be convinced,” said Shahdadpuri.

The unique structure, while endearing the firm to some investors, or LPs, has also kept many of them away.

“Some LPs felt the lack of a larger senior team and dependence on one person was a risk, whilst other LPs invested because of the structure. The LPs who invested did so based on my track record of identifying and backing category creators, market leaders and niche plays such as Sula Wines, Veeba, Mswipe, Saffronart, Raw Pressery, Chai Point and Epigamia,” said Shahdadpuri.

However, Shahdadpuri has recently brought on board two investment professionals to help him out with the second fund. Before DSGCP, Shahdadpuri co-founded and managed the Beacon India Private Equity Fund and GEM India. Prior to that, he worked with Reuters Venture Capital, Bain and Co. and EY.

The firm’s investment style sees it going into companies at a very early stage, sometimes as early as the business plan stage.

“Typically, we go in very early. We sit down with the founder to develop the product, agree to a business plan, test the product-map fit in one or two markets before making a decision on how to take the business forward,” he said.

The fund has entered some of the companies as early as at the pre-incorporation stage, too, as in the case of Veeba and EazyDiner. DSGCP has also incorporated companies with the founders and on several occasions helped promoters come up with a name for the company.

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