New Delhi, Aug. 26 -- Venture capital firms Accel and Avataar Venture Partners have partially exited an Indian software-as-a-service company with a mixed outcome, as the initial investments they made five years ago have generated strong returns but their follow-on bets made just a few months later failed to beat the benchmark.

The two VC firms, via four investment entities, sold a total of 10.49 million shares-or a 4.8% stake-of Amagi Media Labs Ltd for Rs 587.33 crore ($61.3 million) on the open market last week, stock-exchange data show.

This comes less than eight months after Bengaluru-based Amagi floated its initial public offering in January. It raised Rs 816 crore through a fresh issue of shares, down from Rs 1,020 crore planned initially. Its investors divested 26.9 million shares, down from 34.2 million previously planned, raking in Rs 972.6 crore.

At the IPO price of Rs 361 per share, Amagi commanded a post-money valuation of Rs 7,810 crore. This was a 37% discount in rupee terms to its previous valuation of Rs 11,100 crore, when it last raised external capital in the frothy private markets of 2022 and joined the unicorn club.

However, Amagi's shares have soared since the IPO. The shares hit a record high of Rs 726 apiece earlier this month-double the IPO price-before slipping to around Rs 585 levels currently. The company now has a market capitalization of almost Rs 12,860 crore, or around $1.34 billion at current exchange rates.

The conservative IPO price had prompted Accel and Avataar to reduce the number of shares they offered in January. With the shares surging over the past few months, they have now taken some money off the table.

Amagi, founded in 2008, helps media companies create, distribute and monetize streamed content. It provides cloud broadcast and targeted advertising software on a SaaS model. The company's other investors include private equity firms General Atlantic and Creaegis; VC firm Norwest Venture Partners; Premji Invest, the family office of Wipro's Azim Premji; and the family office of Infosys co-founder Nadathur S. Raghavan.

Return on investments

Accel and Avataar first backed Amagi in September 2021-Accel via its India fund and Avataar via its entity Trudy Holdings. Both picked up the company's stake from another VC firm, Mayfield India Fund, and Emerald Media, a pan-Asia media platform backed by private equity firm KKR. They also injected some primary capital into Amagi.

Accel India VI invested about Rs 252 crore ($34.3 million) and Trudy chipped in with about Rs 180 crore ($26.7 million), according to VCCircle estimates based on regulatory disclosures.

The two VCs invested in Amagi again the following year-Accel via its global growth fund and Avataar through its entity AVP I Fund-albeit at a higher per-share price as the company's valuation jumped and it entered the unicorn league. The growth fund invested about Rs 378 crore and AVP I Fund put in almost Rs 74 crore.

During the IPO, Accel's India fund and Avataar's Trudy sold 5 million shares, up from 4.3 million and 3 million planned initially, respectively. They both pocketed Rs 183 crore each and scored a 3x multiple on their invested capital. But Accel dropped its plan to sell 1.76 million shares held under its global fund while Avataar scrapped its plan to sell AVP I Fund's entire holding of 1.86 million shares.

In the latest transactions, Accel sold almost 2.73 million shares each via both its India fund and the global growth-stage vehicle-for a total of Rs 305 crore. This brought down the India fund's stake to 6.91% from 8.17% previously and the growth fund's holdings to 3.05% from 4.31%.

Avataar's Trudy sold 3.17 million shares, or a 1.46% stake, and AVP I Fund sold its entire holdings of 1.86 million, or 0.86% stake in Amagi, for a total of Rs 281.9 crore.

Since Accel's India fund and Trudy invested in Amagi at lower valuations, they have now churned out an internal rate of return (IRR) of around 38-39% and a multiple on invested capital of 5.0-5.2x in rupee terms in the latest transaction, according to VCCircle estimates based on the first-in, first-out methodology. In dollar terms, their IRR would be around 31-32%, the estimates show.

This beats the minimum 20% IRR that VC firms typically chase in local currency and 15% in dollars.

The overall realised IRR of Accel's India fund and Trudy so far-after including the IPO, the latest exit and a share sale to Amagi's promoters last year at a deeply discounted price-would be around 32-33%, the estimates show.

Meanwhile, Accel's global growth fund and Avataar's AVP I Fund have managed an IRR of just about 8% in rupee terms in the latest exit move. In dollar terms, the IRR is a measly 3% as the local currency has depreciated over 10% against the greenback over the past year. While AVP I Fund has fully exited, the Accel vehicle still has a chance to improve its performance if Amagi's shares rally further in the coming months.

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