New Delhi, June 26 -- The $310 million, or around Rs 2,900 crore, acquisition of artificial intelligence (AI) data solutions company iMerit by Nasdaq-listed EXL marks the culmination of more than a decade of patient capital from impact investors and development finance institutions that backed the company through multiple stages of growth.
Founded in 2012 by Radha Basu and Anindya Chattopadhyay, iMerit has evolved from an impact-led digital services startup into an enterprise AI data solutions company. It began as an enterprise that trains people from underprivileged backgrounds to extract and to structure data, which can be used for artificial intelligence training and machine learning; it now delivers high quality data at scale. Along the way, it attracted investors including Omidyar Network, Michael & Susan Dell Foundation, Khosla Impact and British International Investment (formerly CDC Group).
When Omidyar Network first invested in iMerit in 2012, the company was valued at just around Rs 13.3 crore. Omidyar invested Rs 4.13 crore for a 30.95% stake, becoming one of the startup's earliest institutional backers.
Three years later, in October 2015, iMerit raised Rs 22.4 crore from Michael & Susan Dell Foundation, Omidyar Network and Khosla Impact through a preferential allotment. The round valued the company at approximately $9.5 million (Rs 62.9 crore), nearly four times its 2012 valuation.
By 2020, iMerit had begun positioning itself as a specialist in AI training data and machine learning services. It raised Rs 143 crore in a Series B funding round led by CDC Group, now British International Investment (BII), with existing investors Omidyar Network, Michael & Susan Dell Foundation and Khosla Impact also participating.
The firm also had a corporate restructuring where it rolled over its shareholding under a US incorporated holding unit. All existing shareholders are believed to have switched their stake from the Indian operating entity to the offshore vehicle.
Just prior to this exercise, MSDF was the lead shareholder with 37% stake while Khosla Impact and eBay founder Pierre Omidyar's Omidyar Network held around 25-26% each.
VCCircle has gathered that BII brought in bulk of the money in the Series B round and given typical equity dilution in that stage of venture funding would have picked around 20% stake. While existing institutional investors reinvested, their stake is believed to have got diluted. The company likely was valued at around Rs 600-650 crore (~$90 million).
BII deepened its commitment in 2021 with another Rs 95.5 crore investment. It is not clear of others invested again in that round.
But since the investment happened just over a year after the previous round, iMerit is likely to have been valued around Rs 750-800 crore or a little over $100 million back then.
Over the following years, the rapid adoption of generative AI further strengthened demand for human-in-the-loop AI services. iMerit expanded its operations to more than 5,500 employees across India, Bhutan and the US while serving Fortune 500 companies and leading AI enterprises.
The acquisition by EXL values iMerit at $310 million (around Rs 2,925 crore), representing a sharp increase from its early funding years. Based on disclosed funding rounds, the company's valuation grew from about $2.4 million in 2012 to $9.5 million in 2015, before spiking to around $100 million and eventually reaching $310 million through the strategic acquisition.
BII is estimated to be holding around 30% stake in the company, while MSDF is likely to have around 28%. The other two, Khosla Impact and Omidyar likely have around 18% each.
Given that as its estimated holding, the deal means a harvest of around $90-95 million for BII, $87 million for MSDF and $15-16 million each for Omidyar and Khosla Impact.
For BII, this translates into a 3x in around six years, implying 20-22% IRR in dollar terms. MSDF has scored a blockbuster with its $2 million likely returning around $85-88 million, translating into annualised returns of 45% in dollar terms.
Meanwhile, Omidyar and Khosla Impact are likely pulling out around $55-56 million from their $1.5-2 million early punt, churning out 40-45% annualised returns in dollar, as per VCCircle estimates.
Published by HT Digital Content Services with permission from VC Circle.