Exclusive: ShareChat’s Series E round includes $225 Mn debt from Tencent

Last week, ShareChat had announced its $502 million Series E round led by Tiger Global. While the company did disclose the participation of its existing investors Twitter, Snap and Lightspeed in the round, it didn’t reveal a sizable investment from Tencent.

Regulatory filings show that ShareChat has raised $225 million in the form of convertible debt from Tencent Europe and has used its Amsterdam-based SPVs Zennis Capital BV and Hlodyn BV to execute the investment.

To raise the sum, Sharechat has allotted securities in a staggered way at separate issue prices. The Bengaluru-based firm has allotted 4,496 Series B convertible debentures at an issue price of $16,678.5 per debenture to Zennis Capital to raise $75 million.

Further, it has allotted another 7259 Series C Convertible Debentures at an issue price of $20,660.8 per debenture to Zennis Capital and Hlodyn BV to raise $150 million.

It’s worth noting that Tencent is a new investor in ShareChat. The two companies were in talks for a deal for almost two years -- since March 2019. 

If the debt were ever to be converted into equity, Tencent would hold a 19.74% stake in ShareChat, whose backers include Lightspeed Venture Partners, Shunwei Capital, Morningside Ventures, Jesmond Holdings, Xiaomi and Elevation Capital.

Responding to Entrackr’s detailed queries, a ShareChat’s spokesperson said: “During our latest round, as a mature tech company, we have chosen to use a mix of debt and equity for raising funds.”

The company didn’t answer specific queries about Tencent’s investment and why it has chosen the debt financing route.

Following the investment, the promoters' stake in the business has been reduced to 16.08% on a fully diluted basis. According to Fintrackr’s estimate, ShareChat has been valued in the range of $1.25-$1.5 billion in the latest tranche. 

ShareChat didn’t respond to queries on its valuation.

Since equity investment under the automatic route in India from its bordering countries such as China isn’t allowed, Tencent has been using its overseas entities to make investments in India. It had used its European entity to pump $40 million in Gaana’s last financing round in September. 

Importantly, the infusion in Gaana by Tencent was also in the form of convertible debt.

ShareChat’s TikTok alternative Moj is currently counted among the top three home-grown short video apps which also include MX TakaTak and Dailyhunt’s Josh. According to Sensor Tower data, Moj has amassed 181 million downloads since its launch in June last year whereas MX TakaTak and Josh have 183 and 150 million downloads respectively.

While Moj is a new product from ShareChat and its monetisation would take some time, the company’s monetisation efforts with its core product is yet to show significant revenue. The six-year-old company had collected operating revenues of Rs 9.4 crore during FY20. Its losses for the period increased to Rs 676.85 crore in FY20.