Heads Up For Tails starts fresh talks to raise $40 mn from new and existing backers as pet care sector thrives

“The discussions are still at very early stages and depending on the deal construct, existing investors including Peak XV and Verlinvest are expected to participate in the round," one person said on condition of anonymity. The funding is expected to be a primary round and will be used for the company’s expansion plans, the second person said, asking not to be identified.

Peak XV declined to comment. Emails sent to Verlinvest and HUFT founder Rashi Narang were unanswered at the time of publication.

HUFT has been in the market to raise funds for some time now, the people added. Talks with private equity firm KKR in 2022 to raise about $50 million fell through due to a mismatch in valuation expectations.

If the new capital infusion goes as planned, it will be the company’s second fundraise. HUFT previously raised $37 million in a round led by Verlinvest and Peak XV Partners in August 2021. It also counts Amitell Capital and W&C Pet Tech among its backers, according to data from market intelligence provider Tracxn.

 

The company planned to use the funds to expand distribution across India and accelerate new product development and manufacturing, HUFT said in a statement at the time.

Founded in 2008 by Narang, HUFT offers products ranging from human-grade, preservative-free treats to novelty items such as orthopedic beds and organic supplements. The startup has an omni-channel presence with over 70 retail outlets and 30 pet spas and its own site.

All about companionship

The company’s operating revenue increased to ₹312.8 crore in FY23 from ₹215.6 crore in the previous year. Its loss widened to ₹76.7 crore from ₹18.7 crore in FY22, as per an Entrackr report.

India’s pet care sector has attracted significant investor interest in recent years as more people began to adopt pets after covid to satisfy their need for companionship. In 2023, pet care startups raised a record $66.3 million across 16 rounds, but that figure slipped in the following year to $17.9 million spanning 13 rounds, as per Tracxn.

Platforms such as Supertails, Drools and HUFT have been the big beneficiaries. Drools raised $60 million from LVMH-backed private equity firm L Catterton in 2023 while Supertails raised $15 million led by RPSG Capital Ventures in February last year.

 

“We analysed markets like China and the US where different shades of people - married or not, having a single kid or staying single – chose to adopt pets for companionship and we are seeing the similar kind of patterns emerging in India as well," said Prayag Mohanty, principal at consumer-based VC firm Fireside Ventures, an investor in Supertails.

He said most people who adopt are likely to be first-time pet parents by 2030-35 and there is a growing need for platforms such as Supertails that guide them through the entire journey from food and accessories to vets and pharmacies.

Mohanty estimates that 60-70% of India's pet care market, valued at over $1 billion, will be focused on food. Pharmacies (10-15%) and accessories (15-20%) will account for the rest.

With the preference for premium products, there is also an appetite for services such as pet grooming, he said. The pet care market is expected to almost triple over the next decade as tier-2 and 3 areas have started to follow the trend in the metros, Mohanty explained.

 

“At Supertails, we are seeing almost half of our orders come from non-metro cities… these areas will eventually take over a larger share of the pie by 2035," he said, adding that the market is increasingly becoming more organised as people expect better quality products.

“Over the next 4-5 years, we feel several large businesses will get built out in this segment," he said.