Catamaran Ventures in talks to acquire minority stake in Udaan

Catamaran Ventures, the private investment firm established by Infosys’ co-founder NR Narayana Murthy, is in talks to acquire a minority stake in Udaan from some employees of the business-to-business marketplace.

These employees are looking to offload their vested stock options, according to three people familiar with the negotiations.

The Bengaluru-based family office could acquire a 2-3 % stake in Udaan, which was last valued at $3.2 billion when it raised $280 million from new and existing investors as an extension of its Series D funding round in January, the sources stated.

“This is a completely secondary transaction. Some employees might sell part stake to bring onboard Catamaran,” said one of the persons mentioned above, adding that “presently, due diligence is being carried out”.

Udaan has so far secured $1.15 billion from a group of investors, including Footpath Ventures, Lightspeed Venture Partners, partners of DST Global, GGV Capital, Altimeter Capital Hillhouse Capital, Octahedron Capital, Moonstone Capital, Citi Ventures, and Tencent.

As of January, Udaan had over three million retailers and small and medium-sized businesses transacting on its platform. It competes with the likes of IndiaMart, Amazon Business, JioMart, and Flipkart for a portion of India’s rising B2B e-commerce space.

For Murthy’s investment firm, this deal comes almost two years after it raised its holding to 76% in Cloudtail, a joint venture with Amazon. Cloudtail is the largest seller on Amazon India’s online retail marketplace. A stake purchase in Udaan will render Catamaran an entry into the fast-growing B2B e-commerce space as well.

Established in 2016 by three former Flipkart executives Vaibhav Gupta, Amod Malviya, and Sujeet Kumar, Udaan enables retailers to purchase goods from wholesalers and traders across categories such as pharmacy, staples, apparel, electronics, fresh food, and fast-moving consumer goods. It has connected nearly three million retailers across 900 cities with some 25,000 sellers spread across 200 cities. The company provides lending, payments, supply chain, and marketing capabilities, allowing these retailers to source from big manufacturers as well as distributors.

As per a report from Bank of America, the unaddressed SME credit demand in India is about $300-$350 billion, with over 90% of present demand being met by banks. A typical digital SME lender focusses on Rs 1-5 million ($13,575 to $67,875) ticket size with no collateral, an average tenure of about 12-18 months, and with some ecosystem anchor,” the report said.

In January, when it raised fresh capital, Udaan had stated that it would use the funds to also grow its financing capabilities for small businesses and enlarge its supply chain network.

On its part, Catamaran has to date invested in a variety of businesses including the National Stock Exchange, Paperboat maker Hector Beverages, Manipal Global, edtech portal Udemy, insurance seller Acko, and Ace Creative Learning, among others. According to the fund’s website, it manages over $1 billion across asset classes.

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