ICICI Venture eyes digital start-ups, real estate fund of $300-400 million

ICICI Venture has decided to invest in digital start-ups and is considering setting up a separate fund for this purpose.

It is also looking at setting up a new fund in real estate of around $300-400 million to leverage the post covid-19 requirements in the commercial space.

The leading private equity player is re-entering the start-up space after around two decades. When it started as a venture capital fund in 1988, ICICI Venture focused on investing in early stage companies such as naukri.com but from 2002 on, it shifted back to later stage companies and bigger deals.

This is reflected in the fact that, till 2000, the fund did as many as 500 deals. From 2001 till now, it has participated in only 100 deals. The policy meant that it did not invest in domestic start-ups which have grown phenomenally in the last decade.

Last year, India had over 50 unicorns and in the first five months of this year, another 14 joined the list.

“We are evaluating investing in the digital start-up space. We are well-positioned to play an active role here especially as we understand the Indian consumer. We will look at various areas from fintech and healthcare to edtech and digital payments,” said Puneet Nanda, CEO and MD, ICICI Venture.

He believes the return on investment will be better than in other sectors and that the time is right. He expects the start-up space to continue sextupling over the next 10-15 years. The fund will not look at the seed funding of start-ups but rather will put money into the early and growth phases.

Nanda said ICICI Venture is looking at a twin strategy to fund start-ups: set up a separate fund for this while also investing through its existing funds.

It is also looking at setting up a new fund in real estate of around $300-400 million. The company already has a large real estate play but  it has concentrated mainly on affordable housing rather than commercial space. This focus has protected the fund against being adversely impacted by the steep fall in residential real estate demand and prices.

But the pandemic and work-from-home trend have hanged the commercial space landscape. “We are looking at opportunities in the commercial side. Hybrid offices are here to stay so we will look at small-sized offices, maybe nearer to residential areas,” said Nanda.

In infrastructure, ICICI Venture has used only 60 per cent of its $500 million fund (in collaboration with the Tatas) and has been restricted to the power sector. Here too, the plan is to diversify within the sector by looking at investing in renewables as well as transmission.

The fund has enough dry powder across funds and a historical cumulative asset under management (AUM) of $5 billion. Nanda’s target is to double the AUM in the medium term. 

He also said that credit will be an important growth are for the fund in real estate and non-real estate and for both organic and non-organic growth.