The PE firm, which has assets under management (AUM) of $3.6 billion and over $700 million set aside for new investments, has been spun out of Standard Chartered Bank. It has more than 50 investments across six regions (China, India, South East Asia, South Korea, Sub-Saharan Africa and the Middle East), and has a team of 52 investment professionals.
“I think the best vintages for PE investments come in times of gloom and doom," said Udai Dhawan, founding partner and head of India private equity at Affirma Capital.
“We are of course very conscious of the current environment and particularly, if there is a confluence of a domestic slowdown with a global recession, its aftermath could look ugly. However, Indian entrepreneurs are very resilient and a muted environment, in fact, creates many compelling opportunities. So, if you look at our own fund in the last 12 months, we have done four deals," he added.
Of the four investments, the firm has closed in the last one year, two have been in India.
Affirma invested in financial services provider Northern Arc Capital in March along with lead investor IIFL Special Opportunities Fund and in Tirupati Medicare in August, a contract research and manufacturing company for nutraceuticals. In July 2018, it had also invested in Gurugram-based business-to-business travel platform Travel Boutique Online.
In August, Affirma completed its management buyout from Standard Chartered Bank, led by its seven partners and backed by Intermediate Capital Group’s (ICG) Strategic Equity funds through the acquisition of the majority of the bank’s private equity portfolio.
“We are organized as a global fund— there is one investment committee and we are seven partners. We have this concept of relative value which means that if one of our geographies offers better value than the other, we are all equally incentivized to make our investments in that particular region. So, we all vote on deals across platforms and each of us is fully incentivized to make sure the best deal wins, irrespective of what region it is from," Dhawan added.
Affirma is close to finalizing its fourth deal in an IT services firm, said Dhawan. “So, the proof is in the pudding, if we felt that there was no opportunity, we wouldn’t be putting out so much money," said Dhawan.
“We have got the funds, valuations are attractive and this is the time to find value. But obviously, we are not going to be hasty about it. We are going to spend more time in diligence, we are going to take our time and then take the call," he added.
Affirma is now looking to increase the number of buyout deals in its portfolio.
“We have much more flexibility to do control deals. Earlier, we were focused only on minority deals in India. So, we are now actively looking at control deals. Second, in terms of financial services, we could earlier only invest up to 10% in a company in this sector because we were part of the bank, but now there is no such constraint," said Dhawan.
Affirma’s investment thesis will focus on four themes— financial services, consumer, export-oriented themes and healthcare and pharmaceuticals.
“Going forward, our strategy will be to focus on these four sectors but we will also evaluate other kind of businesses opportunistically given that we are a sector-agnostic fund. The focus will be on mid-market deals of $25-75 million each in sectors we understand and where we can add value," he added.
Affirma is looking to deploy its corpus globally over the next two years. “Typically, India’s share has always been roughly about 25-30%, so we will deploy that money in India and we also have a lot of LPs (limited partners, investors in a private equity fund) who are willing to do co-investments with us. So, there is a big pool of capital available, and that could multiply our fund size by two times or even three times," he said.