Eight Roads takes its harvest from decade-old India bet past $150 mn

New Delhi, July 28 -- Global venture capital firm Eight Roads Ventures, which manages over $11 billion in assets across the world including in the US, Europe, China and Japan, has extended its gains from a bet made in India 11 years ago.

The Fidelity International-backed VC firm, which mainly makes technology and healthcare-focused investments, has sold a major chunk of its remaining stake in logistics company Shadowfax Technologies Ltd.

It offloaded about 47 million shares of Shadowfax, which listed on stock exchanges about six months ago, after the post-IPO lock-in period expired. The transaction brought down the VC firm's stake to around 1.42% on a fully diluted basis from 9.3% previously and helped it pocket Rs 964.4 crore (about $100 million), VCCircle estimates show.

Eight Roads has previously liquidated its holding in Shadowfax three times. It divested a third of its stake in Shadowfax at the time of the Bengaluru-based company's initial public offering in January this year, encashing Rs 197 crore. It sold preference shares worth Rs 71.2 crore to private equity firm TR Capital in a secondary deal in 2024. It also offloaded preference shares worth Rs 216 crore in a secondary deal to TPG NewQuest, the secondaries arm of the American private equity firm, as part of Shadowfax's Series E round.

Eight Roads initially invested in Shadowfax as its first institutional investor in September 2015, when the startup raised Rs 49 crore ($7.5 million then) in its Series A round. The VC firm topped up its investment with another Rs 33 crore ($5 million) in the Series B round in December 2016. It participated in Series C and D rounds in 2018-2019 and bought some shares via secondary transactions. Overall, it invested a total of around Rs 135-145 crore, or approximately $20-21 million based on the prevailing foreign exchange rates, according to VCCircle estimates.

So far, the VC firm has pocketed nearly Rs 1,450 crore from its investment in Shadowfax. This translates into around $155 million based on the foreign exchange rates prevailing at the time of the share sales.

Eight Roads still holds a stake worth Rs 178 crore at the current stock price. At these levels, the VC firm's realised and unrealised internal rate of return (IRR) would be around 32% on its total investment in rupee terms while its multiple on invested capital (MOIC) would be almost 11.3x, according to VCCircle estimates.

The latest partial exit, however, likely helped Eight Roads clock an MOIC of 29x and an IRR of about 36% in rupee terms, per VCCircle estimates. The investement multiple and annualised returns are higher because the VC firm had sold the Series C and D preference shares to TR Capital and TPG NewQuest while retaining most of the Series A and B preference shares. It converted Series A and B preference shares into equity shares before the IPO as per local regulations.

The IRR in dollar terms, which is more relevant for Eight Roads, would be around 30% in the latest partial exit.

For perspective, venture capital and private equity firms typically target an IRR of at least 20% at the fund level in rupee terms and 15% in dollar terms. This means Eight Roads is beating the benchmark by a wide margin.

Eight Roads declined to comment for this article.

Besides Eight Roads, Walmart-owned ecommerce giant Flipkart offloaded shares worth Rs 690 crore in the open market transaction. It was the largest shareholder in Shadowfax before the IPO. Combined with its harvest of Rs 400 crore at the time of IPO, Flipkart has pulled out Rs 1,090 crore on its investment.

Flipkart first invested in Shadowfax in December 2019 and doubled down in July 2022. Overall, it invested Rs 324 crore in Shadowfax. Flipkart's stake after the recent share sale has come down to 1.5% from about 7.3%.

Shadowfax provides logistics services to digital-first consumer companies and e-commerce platforms such as Decathlon and Myntra. Additionally, it offers 30-minute delivery services for quick commerce, pharmacy, and food delivery platforms such as Swiggy, Zomato, Apollo Pharmacy, Blinkit, and BigBasket.

Published by HT Digital Content Services with permission from VC Circle.