New Delhi, Aug. 26 -- US-based startup accelerator Y Combinator (YC) has hit a jackpot from another one of its bets in India, less than ten days after it monetized its holding in discount broker Groww with multi-fold returns on its investment.
The California-headquartered investor, which has backed more than 150 startups in India including fintech and digital payments gateway Razorpay and quick-commerce unicorn Zepto, divested part of its stake in ecommerce marketplace Meesho Ltd for Rs 970 crore ($102 million) via open market deals, stock-exchange data shows.
YC offloaded 48.5 million shares it held in Mumbai-listed Meesho via three of its entities-Y Combinator Continuity Holdings I, YCS16 Holdings and YCVC Fund I LP.
Of this, Y Combinator Continuity Holdings I, which held little less than a 1% stake in the startup, sold nearly half of its stake. It sold 23 million shares for Rs 461 crore in the latest tranche, clocking a multiple on invested capital (MOIC) of nearly 196x, according to back-of-the-envelope calculations based on YC's average purchase cost.
This translates to an internal rate of return (IRR) of around 65% in rupee terms, VCCircle estimates show, more than thrice the minimum 20% annualised return that private market investors typically chase in local currency.
To be sure, YC's actual returns could vary since it had invested in Meesho's US-incorporated entity and received shares of the locally registered entity as part of the company's reverse-flip to India for floating its IPO.
Meesho floated its IPO in December last year, raising Rs 5,421.2 crore ($604 million) at a valuation of $5.6 billion. Its IPO was one of the most sought-after public issues in the country and was subscribed about 82 times. The company's shares have since gained 90% over its IPO price, driving the gains for YC and other investors.
At the time of the IPO, Y Combinator Continuity Holdings I had divested 7.2 million shares for Rs 80 crore. So far, this YC entity has encashed Rs 540 crore. Its remaining stake in the company is worth Rs 445 crore more.
In fact, YC's overall harvest from Meesho via multiple vehicles is about Rs 1,050 crore already.
Considering the stake it might hold through the other entities, Y Combinator's overall stake is likely to be higher and could be holding as much as Rs 581 crore more through two other vehicles. However, this couldn't be verified as these entities hold a stake of less than 1% each and the shareholding details aren't public.
Meesho, founded in 2015, was part of Y Combinator's summer 2016 cohort, where it received its initial seed investment of $120,000. YC doubled down in Meesho's Series A round in 2017, which was led by Elevation Capital, and then in Series B round in 2018 that was led by Peak XV Partners (formerly Sequoia Capital India and Southeast Asia). It joined as a returning investor in Meesho's $50 million Series C funding round.
Bengaluru-based Meesho has also proven to be a multi-bagger bet for some of its other investors, too. Elevation Capital has likely churned out Rs 1,246 crore ($132 million), or about seven times the capital it invested. Peak XV, too, has divested a part of its stake. Its overall harvest currently stands at Rs 1,168 crore.
Meanwhile, YC is also generating multibagger returns from Groww. It has cashed out $440 million worth of its holding from the company so far.
Published by HT Digital Content Services with permission from VC Circle.