Finlatics Investment Banking Experience Program Project

FINLATICS INVESTMENT
BANKING EXPERIENCE
PROGRAM PROJECT-4:
The last critical step of the private equity (PE) investment process, the exit, can greatly affect the
final return on investment. Even after years of doing all the right things—including taking a proactive
approach to ownership, aligning performance incentives, and being thoughtful about M&A—a
poorly planned or executed exit can turn a good deal into a mediocre one. Moreover, regardless of
the exit strategy, and despite rising multiples, exits are becoming more challenging. Buyers are more
sophisticated—and more demanding—than ever. Rapid technological change makes it tough for
buyers and sellers to reach a shared understanding of risks as well as potential sources of value. And
many owners struggle to create value past the initial one to three years of the holding period, during
which the primary value levers are pulled. Together, these challenges make the exit process trickier
to successfully execute and lead to a widening spread between strong and weak exits.
For my case study analysis, I’ve chosen to analyse the partial exit of India Quotient
from Sugar Cosmetics in 2021.
ABOUT THE COMPANY-
SUGAR Cosmetics is an Indian e-commerce company, founded by Vineeta Singh (Co-founder and
CEO) and Kaushik Mukherjee (Co-founder and COO) in 2015, with its headquarters in Mumbai. It
focuses on selling makeup and skincare products that are millennial friendly, best suited for Indian
skin tones and are cruelty-free. However, not all of their products are 100% vegan. Their products
are manufactured in state of the art facilities across many countries such as Germany, Italy, USA,
India , etc. and are sold across websites, mobile apps and offline stores.
ABOUT THE PE FUND-
Anand Lunia and Madhukar Sinha started India Quotient in 2012, to test out their hypothesis that
internet-led ventures could be the next big thing. They aimed to raise about Rs 25 crore but
exceeded that a bit to end with about Rs 31 crore. Their timing made them perhaps the third full-
time VC investors in early-stage startups in India after Blume Ventures and Kae Capital, which had
both started in 2010. The partners made 21 investments from that fund, and in the 2014-15 internet
startup boom in India, their portfolio companies saw several markups, which helped India Quotient
raise its second fund—Rs. 109 crore this time, in 2015.
1.)
Vellvette Lifestyle, founded in 2012, took its time making a mark, after raising seed funding of about
Rs. 1.5 crore from venture capital firm India Quotient, which was raising its own first fund. The
Mumbai company did not go far with its initial plan of selling curated make-up and personal care
products from well-known brands on a subscription basis. By 2015, Vellvette’s co-founders, wife and
husband Vineeta Singh and Kaushik Mukherjee, changed track and decided to make their own brand
of cosmetics — SUGAR.
DATE OF TRANSACTION NAME AMOUNT RAISED Lead Investors
TRANSACTION (in million $)
Jun 1 2017 Series A Funding 21 India Quotients and RB
investments Ltd
Mar 8 2019 Series B Funding 12 Anicut capital and India
Quotients
Oct 21 2020 Series C funding 2.5 India Quotients,
Elevation Capital
The given table showcases the different amounts raised by Sugar in the 3 funding
rounds. As can be clearly ascertained, India Quotients has been the lead PE investor
in Sugar from the very seed stage.
JOURNEY OF THE PE FUND TILL ITS EXIT-

Till date, the company has raised a total of US $33 million funds. India Quotient has consistently backed
the founding team of Vineeta Singh and Kaushik Mukherjee through all 4 rounds of funding to date
including the recently concluded Series C where it co-invested with Elevation Capital and A91 Partners. As
a result of this continued participation across rounds, India Quotient is currently the second-largest
institutional investor of the company with a stake worth more than its first two funds put together.
India Quotient first invested in 2013 when the parent company Vellvette Lifestyle Pvt. Ltd. was pursuing a
beauty subscription service business model. In 2015, SUGAR Cosmetics was launched under the same
company with a limited range of Crayon Lipsticks, Vivid Lipsticks, Matte Eyeliner, and Kajal that disrupted
the online cosmetics market. Starting with net revenue of Rs 3 crore in 2016-2017 the brand successfully
clocked in more than Rs 105 crore in its 4th fiscal year, reaching an 85 percent YOY growth rate – while
notching up 1.5+ million followers across social media platforms by the side.
To conclude, India Quotient’s part-exit from Sugar proved to be immensely profitable as elucidated in the
next section.
2.)
The India Quotient made its part exit from sugar in midst of its series C round of funding, at a
valuation of $100 million. According to a few sources, India Quotients’ partial exit from Sugar
yielded a whopping 49 times multiple on the initial investment when the beauty D2C startup
completed its $21 Mn Series C funding round. The VC firm, which previously saw a 25x return
through a part exit from social media platform Sharechat in 2018, has booked an internal rate of
return of approximately 61% on its entire investment in SUGAR, even as most of its shareholding
remains intact. This is an outstanding example of extremely profitable PE exits.
3.)
It is very important to note that India Quotient made a partial, and not a total exit from Sugar,
therefore it still continues to hold a major stake in the company. Due to the insufficient availability
of relevant data, it will be difficult to state the exact percentage of its holding, but according to my
research, the stake of India quotient in Sugar is significant even after its partial exit, making it the 2nd
largest institutional investor in the company.

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FINLATICS INVESTMENT

ABOUT THE COMPANY-

JOURNEY OF THE PE FUND TILL ITS EXIT-

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