Russian internet and technology investment company ru-Net will be the first foreign company to invest in Indian online retailing.

ru-Net will invest Rs 95.2 crore (US$17 million) in BeStylish, an Indian online shopping site for footwear, and Freecultr, an online store for apparels. Freecultr will get an investment of Rs 50.4 crore (US$9 million) while the remaining Rs 44.8 crore (US$8 million) will goes to BeStylish.

Smile Group, which is the umbrella of BeStylish and Freecultr, said the reason why Smile Group went to ru-Net for money is because it was unable to raise money from existing private equity players in India.

While the two Indian online retailers refused to reveal valuations at which the investment was made, sources with knowledge of the deal said that Freecultr was valued at Rs 140 crore (US$25 million) and BeStylish at Rs 196 crore (US$35 million).

Private equity players said ru-Net overvalued the two Indian businesses. One private equity company observed: “To justify a US$25-million valuation, any given company has to have about 1000 transactions a day, where Freecultr is just doing 200 transactions daily.”

An official from Smile Group said the transaction was driven by ru-Net’s urgent need to enter India. He furthered that the transaction is a long-term deal with Smile Group, who has a diverse portfolio of businesses covering categories such as healthcare, travel, e-commerce and digital marketing.

ru-Net, founded by Russian billionaire Leonid Boguslavsky, manages a diverse international portfolio of more than 40 investments spanning the US, Europe, Russia, and Southeast Asia.

GB