Global private equity firms KKR and Partners Group are nearing a deal to lead a $120-150 million funding round in HR-tech services provider Darwinbox, said three people aware of the development, as private equity firms continue to hunt for mature tech startups closer to profitability.
The deal, likely to value the company at around $950 million, will be a mix of primary and secondary fundraise, the people said on the condition of anonymity.
“While KKR is pumping in $50 million in the company, Partners Group will pool in $55 million,” the first person quoted above said.
Early investors Peak XV, Lightspeed Ventures, StartupXseed and Endiya Partners are likely to exit their investment either in part or full in a secondary round. Mint was the first to report the investors’ intent to sell in July 2024.
In 2022, a $72-million Series D funding round led by Technology Crossover Ventures (TCV), took Darwinbox into the coveted unicorn club of companies valued over a billion dollars. In January 2023, it raised an undisclosed amount from Microsoft and State Bank of India as part of an extended Series D round at the same valuation.
Also read | Darwinbox’s early investors look to exit at a 10-15% discount amid SaaS slowdown
The latest funding is being seen as a capitalization table realignment by the company ahead of its planned initial public offering (IPO) later this year. The company is yet to pick bankers and start a formal process. Avendus Capital is helping the company with the fundraise.
Emailed queries to KKR, Partners Group, Endiya Partner, Lightspeed Ventures and Avendus Capital did not elicit any response. A Darwinbox spokesperson, too, did not respond to queries.
Founded in 2015 by Jayant Paleti, Rohit Chennamaneni and Chaitanya Peddi, Darwinbox helps companies address their human resource needs across functions such as recruitment, onboarding, leaves, attendance, payroll and people analytics. Some of its clients include BigBasket, PineLabs, IIFL Finance, Makemytrip and Unacademy, according to the company’s official website.
With the overseas markets leading the business, Darwinbox saw its revenues rise 58% to ₹392 crore for the financial year ended 31 March 2024, according to media reports. The company is likely to turn profitable by the end of the current financial year, the second person cited above said.
HR-tech market
Darwinbox competes with other human resources management software providers, including Workforce.com, Indeed, Qualtrics, BambooHR, SAP SuccessFactors, Workday, PeopleStrong, UKG Pro, Dayforce, ADP Workforce Now, and Oracle Fusion Cloud HCM, among others, acording to a Gartner report.
The India human resource (HR) technology market reached $1.13 billion in 2024, according to a report by consulting and research firm IMARC Group. It expects the market to reach $2.4 billion by 2033, expanding at a compound annual growth rate of 8.7%.
Also read | Will tech HRs hit the restart button?
Globally, HR-tech startups are growing steadily. Rippling said recently that its valuation has topped $13.5 billion after a new $200 million funding round led by Coatue.
Meanwhile, investors like KKR and Partners Group have warmed up to the Indian market in the last 12 months. While KKR has invested HCG Global, Healthium, Leap, and Infinx, among others, Partners Group has been focusing on harvesting its investments and took a large cheque back home from its part exit in Vishal Mega Mart’s initial public offering. PE investors are likely to amp up their exposure to the Indian market with small digital deals.