New Delhi: Former InnoVen Capital senior executives Vinod Murali and Ajay Hattangdi on Wednesday said their new venture, Alteria Capital Advisors LLP, has received approval from the Securities and Exchange Board of India (Sebi) to float a Rs1,000 crore (about $150 million) venture debt fund.
Alteria Capital Advisors LLP, a category-II Alternate Investment Fund (AIF) based in Mumbai, is raising Rs800 crore with a green-shoe option of another Rs200 crore.
The fund has received a commitment of 10% of the corpus from a domestic family-owned business group and expects the first close of Rs400-500 crore by March 2018, managing partner Murali said in an interview.
“We expect to have the first close in the first calendar quarter of 2018, that will be about 40-50% of the corpus, and complete the fund-raise in the second half of 2018," Murali said. Talks with potential investors are underway.
Hattangdi and Murali, formerly chief executive and deputy CEO respectively at InnoVen, left the Temasek-backed firm in August following a fall-out within the management.
InnoVen’s largest investor, Temasek, wanted it to be a captive fund, while another faction saw an opportunity in bringing in more investors at a time when venture debt was turning out to be an attractive asset class.
With their new venture, the duo is tapping domestic as well as offshore investors—financial companies, family-owned businesses, banks and even insurers—to raise funds.
Small Industries Development Bank of India (Sidbi) is one of the potential investors, while talks with at least two banks are in the late stages, Murali said.
Avendus Wealth, an arm of M&A adviser Avendus Capital, is helping the firm with the domestic fund raising.
Interest from all categories of investors, in the venture as well as the asset class, continues to be promising, Murali said. “For the banks, it is primarily to have access to young, innovative companies in the start-up space that are otherwise too risky for them to lend to… While, for family offices, it its an attractive area to deploy excess liquidity that has come out of traditional asset classes like gold and real estate."
Alteria is scouting deals in the consumer, technology and healthcare spaces, including logistics, education technology, food technology sub-sectors, Murali said. It will look to back VC-funded companies starting at the series A stage.
Popular in the US and parts of South-East Asia (SEA), venture debt has become mainstream in India only over the last few years, with big start-up brands such as Byju’s, Yatra.com, OYO and Swiggy, to name a few, raising crores in debt as against venture capital.
The instrument helps start-up founders raise capital without parting with stake. The deals are structured largely as debt, but a small percentage of the investment, usually 15%, is equity. For this reason, venture debt deals happen alongside VC investments.
“That is why a venture debt fund is attractive to investors because on one side you have predictable fixed income returns and you are also benefitting if the underlying equity becomes attractive," Murali said.
Both Murali and Hattangdi are credited with pioneering the asset class in India.
In 2008, the duo set up SVB India Finance, a subsidiary of Nasdaq-listed SVB Financial Group, and expanded the business into SEA. The firm was later taken over by Temasek, Singapore’s sovereign wealth fund, and United Oversees Bank, in 2015 and rechristened InnoVen Capital.
Widely regarded as the largest player in the space in India, InnoVen has cumulatively deployed $225 million over 150 transactions, as of March 2017. Other venture debt businesses in India are: Trifecta Capital, which is in the process of raising Rs500 crore, and Intellecap Group. InnoVen and Intellecap are non-banking financial institutions.