Warburg bets on e-com

When Warburg Pincus announced it was investing $175 million to form a $250-mn joint venture with real estate developer Embassy Group last month, it was not really a play in the realty business for the New York-based private equity (PE) giant. The JV plans to build warehouses across the country to cater especially to the demand of emerging e-retailers.

It is the fourth such investment by the PE giant in about a year to grab emerging prospects, not only in India's emerging e-commerce businesses but also in opportunities coming with the new ecosystem required for it. In September, Warburg invested $45 mn in Bengaluru-based Capillary Technologies, a SaaS-based customer relationship management solutions provider, targeting e-commerce players for growth. Earlier in the year, it invested $133 mn in e-commerce-focused logistics start-up Ecom Express.

"We are excited about the theme of e-commerce enablement, whether in terms of providing logistics services such as express delivery and warehousing to e-commerce companies or providing data centre infrastructure, hosting and related services to e-commerce businesses and even SME (small and medium enterprise) users seeking to harness the power of the internet," says Viraj Sawhney, managing director, Warburg Pincus India.

The firm also invested $30 mn in CarTrade, an online classifieds business for used cars, in October last year. In 2012, it invested $32 mn in leading classified player Quikr.

"The e-commerce sector is at a broad confluence of multiple macro trends - large population of youth, rising standards of living, greater consumption and discretionary expenditures and, of course, increased internet and smartphone penetration," says Nitin Nayar, managing director Warburg Pincus India.

This is an approach different from Indian PE and venture capital (VC) companies, which are investing either in the e-commerce businesses directly or putting money into ancillary businesses. For instance, Renuka Ramnath's Multiples Alternate Asset Managmennt is investing only in ancillary businesses for e-commerce, such as Delhivery. On the other hand, the Vani Kola-led Kalaari Capital has been a direct investor in e-commerce ventures such as Snapdeal and Bluestone. This is necessary for them to meet their investors' risk appetite, which varies for limited partners committing to a PE or VC firm.

"Warburg Pincus primarily invests out of a single global fund that provides the flexibility to invest in potential opportunities as these arise, including the ability to fund portfolio companies through various stages of their growth trajectory but without the pressure of having to deploy an allocated amount within a defined period," says Nayar.

To that extent, Warburg Pincus identifies venture or growth investment opportunities in India and the firm has the mandate to pursue these. This makes it a different approach for investing in Indian e-commerce.