BackAvendus Capital to enter structured finance with Rs500 crore fund
Avendus Capital will target investments in growth companies, mid-market companies, solid businesses
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New Delhi: Avendus Capital, backed by global private equity firm Kohlberg Kravis Roberts & Co. Lp, is all set to mark its presence in the structured finance space with a dedicated Rs500 crore fund, a top executive told Mint.
The fund—a major part of which is being raised from domestic investors—will target investments in growth companies, mid-market companies, solid businesses where there is an opportunity to provide structured debt/private financing. It will not, however, look at infrastructure, real estate or stressed assets.
“It is all synergy within the firm... starting from corporate financing advisory, and wealth management business and now financing business which is coming into shape," said Sandeep Thapliyal, chief executive of Avendus Finance Pvt. Ltd, the non-banking financial company (NBFC) floated by Mumbai-based Avendus Capital.
Thapliyal is the former head of commercial and investment banking at RBL Bank Ltd.
US-based KKR bought a significant stake in Avendus Capital for about $115 million in November 2015. As part of the deal, KKR committed to invest another $60 million in the NBFC, which has been started with a capital base of Rs400 crore. The firm expects to take it to Rs3,000 crore over the next 18-24 months.
“While we will look at senior secured debt, we will also look at PE takeout situations, mezzanine financing and acquisition financing and so on and so forth," said Thapliyal.
“So the underlying philosophy is looking at high quality business and entrepreneurs and there are a bunch of them in the market, especially in the mid-market where we are working. And which is why there has been so much of equity interest that Avendus has been able to evince in some of those companies and businesses."
Since its inception in 1999, Avendus has done private equity syndication worth $4.4 billion across 117 deals. It has advised in over 100 M&A deals totalling $6.1 billion.
The proposed structured debt fund will be led by six members, including Thapliyal.
While the firm has already hired a couple of senior executives, it is looking to hire one more person. Over the next 6-7 months, the firm will have about 17-18 people on board.
Avendus Capital has recently provided financing to the tune of Rs50 crore to Mumbai-based nutraceutical ingredients company OmniActive Health Technologies Ltd for its acquisition of Indfrag Ltd.
Also, promoters of auto components maker Sona Group on 5 January acquired the shares held by Mahindra & Mahindra Ltd in joint venture company, Mahindra Sona Ltd, for Rs120 crore using a loan extended by Avendus Finance.
“Clearly the financing business per se is expected to sort of play a significant role, given the opportunity which is out there. And also, some of the other businesses that are coming on stream. Over time, corporate financing will continue to do well but some of the other businesses have become sort of prominent as far as the firm is concerned. And, at the end of it, it is the entire (Avendus) franchise and they all feed on each other," Thapliyal said.
He added that there is a huge opportunity in the private credit space.
“Over the next four to five years, it is $14-15 billion opportunity," he said, citing internal research.
Several foreign and domestic fund managers are betting big on the growing investment opportunity in the private credit space in India. As per recent data from London-based market research firm Preqin, the number of India-focused private debt funds has grown exponentially in the recent past, and 12 such funds are on the road to raise as much as $5 billion in 2016 alone, the highest in any year.
In September, Avendus Capital hired the entire top management of Ambit Investment Advisory, including CEO Andrew Holland, as part of a plan to enter the hedge fund business and expand its portfolio of alternative asset management businesses.
Avendus Capital will be managing $2 billion by the end of the current financial year in its wealth management business, George Mitra, CEO of Avendus Wealth Management, told Mint in November last year.
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