Tiger Comes Out Of the Diamond Lane

 Tiger Comes Out Of the Diamond LaneTiger Global total in total invested about Rs. 302 crore ($52.22 million) in the four tranches to acquire about 19.14 million shares of CaratLane, according to VCCEdge. Tiger Global first invested in CaratLane in 2011 and put more money in each of the next three years. It last invested in the firm in December 2014 at a valuation of US$117 million (Rs. 716 crore then). After Titan acquiring over 62 per cent stake for Rs. 357.24 crore, which freshly evaluates CaratLane at Rs. 576 crore i.e. valuation loss of 19.5 per cent over two years, as per VC Circle.

Funding Analysis

Any VC or PE funds evaluate and look for 2 to 5 times return over the time span before exiting any business model. Here, Tiger Global exited with almost same amount in 3-5 years of investment, means a clear wrong call on their planning and estimation or this is a sign of no confidence in this sector. Online jewellery still looks like a bubble in Indian online business market, where returns are low and even after pouring money, turnover looks tough to increase. CaratLane managed to clock only Rs. 141 crore in 2015-16 even after the huge funding of Rs. 302 crore from Tiger Global. As per few analysts, it’s a herd game, if one VC funds any sector, other also considers it. This is what is happening in jewellery sector, wherein BlueStone also received several rounds of funding in spite of low turnovers.

Online Challenges

In India, there are several challenges, where jewellery is bought majorly for occasions like marriage, anniversary and mostly for investment. Jewellery bought for these occasions are taken with collective decision, after physically trying and generally from traditional known high-street jeweller. The new consumer who is net savvy is in the age group of 21 to 29. These millennials have started buying low-price jewellery on Mother’s Day, Women’s Day, and Valentine’s Day or even for office wear. This ranges between Rs. 5000 to Rs. 15,000 and accounts to very low percentage of overall jewellery sales. Another product, which is largely bought or compared online are diamond solitaires ranging between 0.20 to 2 cts. This sells easily because of standardised parameters and trusted third party certificates. Besides this, it is not easy to attract customer online in-spite of various benefits it provides. This is also the reason many e-tailors have started Omni-channel approach that is opening physical stores along with online which would help them increase their sales and overcome problem of see- feel and buy. Voylla, BlueStone and CaratLane have started opening Experience lounges in various cities form last two years.

CaratLane Numbers

CaratLane, which was incorporated in 2007, had revenue of Rs. 141 crore in 2015-16, Rs. 127 crore in 2014-15 and Rs. 101 crore in 2013-14, reports added. In June 2011, CaratLane received its first funding of US$ 6 million, when company director quoted that its current turnover is Rs. 50 crore and it expects to make it Rs. 135 crore during fiscal 2012, as reported in The Hindu.

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