Unicommerce IPO: Inside Kunal Bahl’s second coming

Mumbai/Bengaluru: Just months after home services platform Urban Company was founded in 2014 by four former executives from consulting firm BCG, Snapdeal founder Kunal Bahl and his understated partner Rohit Bansal put ₹57 lakh into the startup, then known as Urban Clap. It was a gamble. Through their venture company, Titan Capital, they were essentially backing an idea. They were not alone; other established venture capitalists such as Elevation Capital and Accel Partners also participated in that March-April 2015 round.

Last month, when Dharana Capital invested $50 million in Urban Company, Titan Capital exited with around ₹110-120 crore. The venture investor had multiplied its money 200 times. Few investors in India, even the most storied ones, can boast of such phenomenal returns.

It was not a flash in the pan. Titan Capital had made very profitable exits earlier as well. In 2022, it booked a 100X exit from Ola Cabs, as well as from debt recovery and legal automation business Credgenics, according to a report by tech news publication Entrackr in November 2023. Again, when Mamaearth went public last October-November, Titan Capital booked a 100x return.

And now, the initial public offering (IPO) of Unicommerce, which was acquired by Snapdeal three years after it was founded in 2012, is set to open. Over the years, the logistics-focused SaaS business stayed under the radar, became profitable, and funded itself through internal accruals. It is now valued at around ₹1,100 crore. Unicommerce offers e-commerce solutions covering order and inventory, returns, and omnichannel management, and serves more than 20,000 brands and marketplaces, including boAt, Lenskart and Myntra.

Promoter Snapdeal, now rebranded as AceVector, as well as Softbank, are offloading some shares in Unicommerce. But this time, Bahl and Bansal, who own 10% of the business through Titan Capital, are staying put.

With these handsome exits, the duo have shown time and again that they know a thing or two about backing up-and-coming startups. When it comes to running an enterprise, however, they do not quite have the same record.

Snapdeal disappointment

Before Titan Capital was formed in 2015, the Bahl-Bansal duo were already investing their capital in select early-stage startups, including Ola Cabs, their first-ever investment. They did it discreetly, at a time when their energies were still focused on turning Snapdeal into a success.

At one time, the founders believed that they could topple Flipkart and turn Snapdeal into India’s Amazon, their confidence fuelled by a fat war chest. Japanese VC investor SoftBank had put over $600 million into Snapdeal in 2014 and backed this up with another $500 million in August 2015. (In all, Snapdeal has raised over $1.77 billion to date, as per data provided by market intelligence provider Tracxn.) Amazon, which had entered in 2013, was still finding its feet in India back then.

In those months, Bahl was also aggressive on social media platform Twitter (now known as X), and was not above publicly taking on competition. He even told journalists that it was only a matter of months before Snapdeal overtook Flipkart. “The one thing I am very, very clear about right now is that I think we’re going to be No.1 (in terms of sales) by March 2016. I think we’re going to beat Flipkart by then,” Bahl said in an interview with The Economic Times.

By 2016, however, Snapdeal was desperately trying to stay afloat, as Mint had reported extensively at the time, and the founders found themselves in a boardroom fight with their own investors. The shoe was on the other foot—instead of overtaking Flipkart, Snapdeal was now staring at a takeover by its rival.

The proposal had the backing of Snapdeal’s investors, but as is now public lore, Bahl and Bansal pushed back fiercely, unwilling to let their startup be acquired. They decided that Snapdeal would take its own path and become sustainable on its own. The backlash from Snapdeal’s investors was fairly public, with Kalaari Capital’s Vani Kola telling television channel ET Now that she was “extremely disappointed and shocked,” by the decision taken by Bahl and Bansal to call off talks and “their disregard for investors and employees’ interests”.

The e-commerce platform did not raise money again thereafter, but it also never managed to match Flipkart’s or Amazon’s scale.

Nevertheless, when the markets were buoyant in December 2021, Snapdeal filed for a public listing. The company was aiming to raise around ₹1,250 crore in primary capital, and had proposed to sell over 30 million shares in an offer for sale—the promoters and investors would sell a part of their stakes. But within a year, the IPO plans were withdrawn, after tech stocks such as Paytm and Zomato, which had just held their IPOs, sank below their listing price soon after going public.

The founders still need to return capital to their investors. The Unicommerce IPO, if successful, will help it do that to a very small extent with SoftBank. The Japanese investor’s stake in Unicommerce is a relic of its investment in Snapdeal. After the merger with Flipkart failed, Softbank wrote off the investment in Snapdeal. The merger was called off in 2017, but by then Softbank had already invested about $15 million in Unicommerce.

Indeed, one understated requirement for the Unicommerce IPO is that it needs to provide Softbank an exit. The red herring prospectus says that Softbank has the right to sell back its stake in the company to AceVector by November 2025, at a predetermined valuation, if Unicommerce or AceVector are unable to go public by November 2025.

Building Titan Capital

Titan Capital’s success is no secret today, but for the longest time, Bahl and Bansal avoided speaking about their investment vehicle publicly, choosing instead to back founders on the quiet and focus on Snapdeal. Bahl recounted an incident that led to the origins of Titan Capital, years before they had turned into investors. In the late 2000s, the two young entrepreneurs went to a Delhi-based investor to pitch their startup idea. They received great feedback but were asked for 60% ownership for a ₹50 lakh investment. “Our hearts literally sank because these were not angels, they were devils,” Bahl told Mint. “At that moment, call it a scar or an inspiration, we decided that when we had the ability, capital perspective or knowledge network, we would give back to the next cohort of founders.”

Today, Titan Capital typically does early-stage investments in tech-enabled sectors including fintech, software-as-a-service (SaaS) and logistics and boasts of more than 200 startup investments. Recently, it launched a ‘Winners Fund’ to double down on some of its existing portfolio companies and has sought external capital for this fund. However, the founder duo continue to remain the largest shareholders.

Other investors have taken note of Bahl’s and Bansal’s track record as investors. Anand Lunia, partner at VC firm India Quotient, who has worked with Titan Capital for over five years, alluded to Bahl’s exceptional qualities as an investor. “Kunal is a great investor, and while we have known him only in the capacity of Titan Capital, how he has built it into a premier seed-stage firm … while running his other companies, including Unicommerce, is amazing and very unique,” he said. “They (Titan’s team) have produced a very high success rate in spite of the high volume of deals, which is very tough to maintain for even the best of the best funds,” Lunia added.

Titan Capital’s growth over the last decade appears to have given founders more clarity. Bahl, who recently turned 40, told Mint he plans to dedicate the next chapter of his career towards backing founders, while continuing to work at his other businesses. “Everyone has to determine the purpose of their life. For me, it’s supporting smart, motivated people to achieve their goals, whether through operating a business, someone working with us, someone building a business with us, or by being a small part of their overall journey as an investor,” he told Mint on the sidelines of Unicommerce’s IPO conference.

Some of his older investors, who are yet to see returns on their Snapdeal investment, say he has matured over the years. “Kunal has moved on. Kunal is a guy who is now thinking more as an investor. When you are an investor, you know very well how to mend bridges. You are not looking at it with a builder and operator’s ego,” said a person familiar with Bahl’s working style since the early days of Snapdeal. “The biggest transformation for Kunal is that his mindset is now that of an investor, which means he is far more accommodative of different points of view,” the person added.

Bahl insists his partner Bansal has had an equal role to play in all their successes. “We used to sit next to each other in class 11 and 12, and we’ve known each other for 25 years now. Every day, we have lunch together; every day, for the last 17 years that we’ve been building the company,” he told Mint. “Someone defined Rohit as being the deep brain and me as the wide brain. We each have our own ways of looking at things, and those perspectives are different. That’s what helps us learn and also replicate success.”

Hands-off success

Aside from some operational involvement on his part, Bahl solely credits Unicommerce CEO Kapil Makhija and CFO Anurag Mittal for its success, noting that they have steered the company for nearly a decade and brought it to the IPO milestone.

“When we acquired Unicommerce in 2015, the revenues were negligible, and we didn’t have many customers. We took it from there to taking it public, which was a long, arduous path. But it was executed with great discipline to build a lasting, enduring company with a clear profit model in mind,” Bahl said.

The duo have never publicly spoken before about how their experience with Snapdeal changed their perception on building businesses or investing in other businesses. But one of the things that stands out about Unicommerce is that it came up on its own steam, with no external funding. “We have never tried to grow at unsustainable growth rates. It requires a lot of discipline, patience, and a good temperament,” Bahl said, adding that the company’s focus on building a good premium product has led to its “good” margins and operating profits. “Internally, we have never even broached the topic of burning money and growing faster. It’s not how we think; it’s not how we’ve approached the building.”

In 2023-24, Unicommerce posted revenue of ₹103.5 crore after nearly doubling its income to ₹ 90 crore in 2022-23. Its net profit also doubled last year to ₹13 crore from ₹ 6.4 crore the year before.

Unicommerce exits

Unicommerce’s ₹276.57 crore initial public offering, through the offer for sale (OFS) route, will open on 6 August and, if successful, the company will list a week later. SoftBank owns 29% of Unicommerce, while AceVector, the largest shareholder and Snapdeal’s owner, holds a 34.91% stake.

The two entities will sell shares worth ₹267 crore (around $33 million) at the upper end of the IPO’s price band and split the proceeds evenly. The ₹160 crore or so that it gets will certainly not help SoftBank recoup its losses in Snapdeal. However, it will continue to hold a 14-15% stake in Unicommerce.

Bahl and Bansal own a 9.9% stake in the company through Titan Capital, which they are retaining. Typically, an OFS is not very popular with investors as the money that is raised goes to investors who are exiting and nothing accrues to the company. So, why is Unicommerce going public now, without raising any primary capital?

“We believe now is a good time to go public because being listed brings several benefits,” Bahl said. As a B2B company, listing the SaaS business increases “credibility in the eyes of global prospective customers,” he said, citing the example of Infosys. “Mr Murthy (Infosys founder N.R. Narayana Murthy) always said that after Infosys went public, it suddenly increased credibility. We’re managing the backend for some of the largest brands in the country, and being a listed, profit-making, growing company with great governance helps when we talk to large enterprises,” said Bahl.

“Second, we don’t have plans for heavy machinery; our key resource is our team. We have a fantastic team under Kapil and Anurag’s leadership, and being listed helps us attract and retain top talent. ESOPs become more liquid and closer to real money compared to something in the distant future,” he said.

Third, “being listed gives us the ability to grow inorganically.... Listing provides us with the currency to do that when an opportunity presents itself in the future. There are more reasons, but these three alone are significant enough,” Bahl added.

The proceeds from the OFS will infuse AceVector (or Snapdeal) with cash at the holding company level. Bahl did not say what the company plans to do with it, only that the board has been tasked with deciding how it will be distributed.

AceVector’s own shareholding structure is made up of over 70 investors, including prominent names such as Cred’s Kunal Shah, Edelweiss Mutual Fund CEO Radhika Gupta, her husband Nalin Luis Moniz, and industrialist Anand Piramal. 

Mint reached out to some of Snapdeal’s investors, including SoftBank, Nexus Partners and Premji Invest, to ascertain the kind of returns they are anticipating from the IPO, but is yet to get a response.

For Bahl, taking Unicommerce public will be a poignant moment, something he was not able to do with Snapdeal. But once the listing is done, he says, it would be business as usual. “We will do the ceremony and then get back to building Unicommerce.”

Asked if he preferred being an investor or an operator, Bahl quipped that choosing between the two was like choosing between being a husband and a father. “I’m not this compartmentalised—that this is my operator life, and this is my investor life,” said Bahl. “At some level you think of us as investors in the Titan context; we actually think of ourselves as operators even in the Titan context.”