As expected, much of our weekly wrap is dominated by the coronavirus. But not all of the news is bad – big deals are still happening, the fundraising trail appears positive, mega deals are booming in China and the initial public offering (IPO) scene in that country is back on track.
Closer home, news from leading unicorns across Southeast Asia (SEA) and India may indicate the shape of things to come – it may get worse before it gets better!
Earlier this week, SEA’s largest and most-funded startup Grab said it was preparing for ‘a potentially long winter,’ and taking measures to be more efficient and conserve cash. The decacorn had earlier asked employees to take voluntary no-pay leave as the COVID-19 outbreak batters its business.
“Airy’s management has considered many factors, including market conditions that almost collapsed due to the COVID-19 pandemic, as well as the severe economic challenge. We are sorry for any inconvenience caused,” its chief executive Louis Alfonso Kodoatie said in a statement on Friday.
In India, restaurant aggregator Zomato said it was laying off 13 per cent of its workforce even as it announced pay cuts of up to 50 per cent for the rest of its employees. Similarly, Temasek-backed Cure.Fit has reportedly laid off about 1000 employees and has cut pay across all levels.
According to this analysis by our India correspondent Pramugdha Mamgain, startups in the country raised around $692 million in venture capital and private equity financing across 74 transactions in April. This is about half of what they had raised in March, signalling tepid investor interest in the wake of the COVID-19 outbreak.
The pandemic, and the ensuing market turmoil, is also the first major crisis for many of Southeast Asia’s venture capitalists.
My colleague Kristie Neo had a detailed take on whether VC firms in the region were proving their ‘value add’ during these challenging times. At least seven SEA founders told her they either had their term sheets pulled by investors or know someone who faced such a situation.
Another sector that has been thrown off course by the virus crisis is Malaysia’s peer-to-peer (P2P) lending platform. Last year, the country had given out additional P2P licenses to enhance access to finance for entrepreneurs and small and medium enterprises (SMEs), and our Malaysia reporter Yimie Yong explains why these platforms may see more debt restructuring, or even defaults, ahead.
Amidst the gloom, COVID-19 seems to have had a game-changing impact on HappyFresh, in what may be a milestone for this region’s loss-making online grocery industry.
Our features editor, Kenneth Lim, in this report, says HappyFresh is on course to achieve a net profit in the coming months. Its chief executive Guillem Segarra told us the firm had recorded a net profit in Indonesia in the first quarter of 2020 and expects the same for its other two markets, Malaysia and Thailand, by the second quarter or the middle of the third quarter.
In other positive news emerging from Indonesia, our biggest scoop this week was the mega $109 million funding round for Jakarta-headquartered coffee chain Kopi Kenangan.
After our Indonesia reporters – Ardi Wirdana, Aastha Maheshwari and Sarah Yuniarni – put out the story, the company in an official announcement confirmed the financing round from six investors – Sequoia, Sofina, Verlinvest, B Capital, Horizons Ventures and Alpha JWC.
Kopi Kenangan’s official announcement did not provide the complete picture. Kenneth’s follow-up story on the company had a slew of additional details on the deal, including Singapore’s sovereign wealth fund GIC being part of the round, which tripled the company’s valuation to $477 million.
Our Vietnam reporters – Quynh Nguyen and Nguyen Thi Bich Ngoc – had an exclusive on multi-channel sales and management platform Sapo Technology raising Series A led by South Korean investor Smilegate Investment.
In India, the positives emerging from COVID include private equity firms chasing local drug makers that manufacture active pharmaceutical ingredients, and the country’s drone startups witnessing a spike in business during the lockdown. Besides, Carlyle Group has reached a deal to acquire up to a 74 per cent stake in Indian animal healthcare company SeQuent Scientific Limited for about $210 million.
But two months into the pandemic, a large number of Indian startups are confronted with a bleak future. We carried this analysis by Mihir Dalal from Mint, which states the crisis will lead to large numbers of startup failures in India, as capital-deprived, ill-conceived business models are set to collapse. In addition to more startup failures and a wide drop in valuations, a spike in mergers and acquisitions, especially distressed sales, is expected over the coming year, driven largely by investor attempts to cut losses and save face.
On the fundraising trail
US alternative investments giant Blackstone raised nearly $1.9 billion for funds managed by its Asia core-plus real estate investment arm, Blackstone Property Partners Asia.
Cross-border private equity firm Cathay Capital Private Equity closed its second Sino-European Mid Cap Fund at €800 million ($865 million), days after its VC arm – Cathay Innovation – raised $550 million for its second global vehicle.
Chinese technology-focused private equity firm Oceanpine Capital held a $200 million first close for its second vehicle that targets to raise $400 million.
She also had a story on Fubon Life Insurance, the insurance unit of Taiwanese financial conglomerate Fubon Financial Holdings, planning to invest an aggregate of $203 million in three private equity funds, including KKR Asia Pacific Infrastructure Investors, CVC Capital Partners VIII and Thoma Bravo Fund XIV-A.
OLX Group-backed property listing platform EMPG has fully acquired Lamudi Global, a competitor operating in emerging markets such as Indonesia, the Philippines and Mexico.
Singapore state-owned investment company Temasek Holdings has joined The Libra Association, a Facebook-backed blockchain-based payment system project.
PE firm Advent International-backed Manjushree Technopack is in advanced discussions to acquire two plastic packaging companies in India for about Rs 400-500 crore to strengthen its geographical footprint and spice up topline growth.
The chief executive of MUFG Innovation Partners, Nobutake Suzuki, said in an interview that the corporate VC arm of Japanese conglomerate Mitsubishi UFJ Financial Group is in advanced talks with three startups in this region.
Chinese deals back on track
The coronavirus pandemic has been a boon for China’s healthcare and biotech firms that have raised a record $6.8 billion in fresh equity-linked transactions this year.
Key developments in the deals landscape last week included Sequoia China and Tencent investing $244 million in a unit of Hong Kong-listed Shimao Property, AI unicorn CloudWalk securing $254 million in fresh funding and Shenzhen-listed Chinese medical device maker Kinetic unveiling plans to raise $155 million from Temasek and Hillhouse.
Earlier in the week, Guangzhou-headquartered fresh food and ingredients distribution platform Lehe Food said it had raised $56 million in a Series C round co-led by existing investor DragonBall Capital and new backer CDH Investments.
IPO-related developments in China that made the headlines include railroad equipment developer Victall and diesel engine parts maker Changyuan Donggu seeking to raise $172 million and $129 million respectively via Shanghai listings, while cybersecurity firm Qi An Xin eyes a $634 million listing on the STAR Market.
JD.com-backed Chinese delivery platform Dada Nexus, and Legend Biotech, a global novel cell therapy spin-off of Hong Kong-listed biotech company GenScript Biotech, have filed for US listings.
We had our second webinar – Open for business: Sequoia & Vertex on dealmaking during COVID-19 – on Thursday, and the team and I were delighted to have two of the largest VCs firms across SEA and India sharing their insights.
My colleague Kristie summed up some of the key points brought out by Abheek Anand, managing director of Sequoia Capital and Chua Kee Lock, CEO of Vertex Holdings in this story.
Premium subscribers will get the video and complete transcript of the webinar in the next couple of days. If there are topics that you would like us to cover in future webinars, let us know at firstname.lastname@example.org
SE Asia’s VC Funds: Q1 2020 Review
Another highlight of the week was Southeast Asia’s VC funds: Q1 2020 Review, a detailed report by Kenneth and Andi Haswidi.
Their analysis showed the performance of SEA-focused funds weakened in the first quarter of this year, putting an end to a year-long growth streak. The situation is poised to worsen as the COVID-19 pandemic further hurts investors’ risk appetite.
Wherever you are, take very good care. Stay safe and continue to look out for each other. Have a good week ahead!