Al­te­ria Cap­i­tal to Launch .₹ 1k-cr Ven­ture Debt Fund

In­dia’s big­gest ven­ture debt fund to be set up by for­mer se­nior ex­ec­u­tives of In­noVen Cap­i­tal

The Economic Times - - Disruption: Startups & Tech - Supraja.Srini­vasan @times­group.com

Mumbai: For­mer se­nior ex­ec­u­tives of In­noVen Cap­i­tal, Ajay Hat­tangdi and Vinod Murali, plan to launch Al­te­ria Cap­i­tal, touted to be the coun­try’s big­gest ven­ture debt fund with a cor­pus of .₹ 1,000 crore.

Al­te­ria Cap­i­tal will have a cor­pus of .₹ 800 crore ($125 mil­lion) with a green­shoe op­tion of rais­ing an ad­di­tional .₹ 200 crore ($30 mil­lion), ac­cord­ing to Hat­tangdi and Murali, who said the process of reg­is­ter­ing it with cap­i­tal mar­kets reg­u­la­tor Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) is on.

Un­like In­noVen Cap­i­tal, which op­er­ates as a non-bank­ing fi­nance com­pany (NBFC), Al­te­ria will be reg­is­tered as a cat­e­gory II al­ter­na­tive in­vest­ment fund (AIF), with a ten­ure of seven years and a pos­si­ble ex­ten­sion of two years.

The ven­ture debt fund is look­ing to make the maiden close of the fund by the first quar­ter of 2018, with a tar­get to raise 25-50% of the cor­pus (.`250-500 crore) to en­able de­ploy­ments around the same pe­riod, Hat­tangdi, a man­ag­ing part­ner at Al­te­ria Cap­i­tal, told ET.

At .₹ 1,000 crore, Al­te­ria Cap­i­tal will be In­dia’s largest ven­ture debt fund yet with cheque sizes rang­ing from .₹ 3 crore at the se­ries-A level to .₹ 100 crore.

ON AIF ROUTE

ET had re­ported Hat­tangdi’s and Murali’s exit from In­noVen Cap­i­tal in June.

Hat­tangdi and Murali, both of whom were ear­lier with Citibank, launched US-based Sil­i­con Val­ley Bank’s (SVB) ven­ture lend­ing op­er­a­tions here in 2008 and played a key role in pi­o­neer­ing both the as­set class as well as script­ing In­noVen’s suc­cess in this mar­ket.

At In­noVen, they had played a cru­cial role in fa­cil­i­tat­ing debt in­vest­ments to some of the largest star­tups, like ShopClues, Byju’s, Swiggy, OYO Rooms, Practo, Snapdeal and Pep­per­fry, with in­vest­ments in FY17 ag­gre­gat­ing $225 mil­lion (.`1,500 crore).

“From an op­er­at­ing stand­point, the AIF is a more ef­fi­cient ve­hi­cle to in­vest, es­pe­cially with re­gard to ex­its for in­vestors,” Hat­tangdi sa- id. Last Au­gust, the reg­u­la­tor mod­i­fied rules for al­ter­nate in­vest­ment funds to sim­plify the cat­e­gories un­der which the funds will be brack­eted, and also cut down on re­quire­ments of in­vest­ment by the gen­eral part­ners or spon­sors of the fund, thus mak­ing it eas­ier for fund man­agers to float their funds.

Hat­tangdi and Murali, who is also man­ag­ing part­ner at Al­te­ria Cap­i­tal, ex­pect the reg­is­tra­tion process to be over by mid-Septem­ber, af­ter which they will begin the of­fi­cial fund rais­ing process.

Al­te­ria Cap­i­tal has re­ceived in­ter­est from a host of off­shore and do­mes­tic in­vestors who are look­ing at the as­set class as an at­trac­tive bet to in­vest in the Indian ecosys­tem. US-based en­dow­ment funds and fam­ily of­fices, Indian banks and fi­nan­cial in­sti­tu­tions, as also do­mes­tic fam­ily of­fices and Indian Ul­tra HNI groups have shown keen in­ter­est in the fund as po­ten­tial in­vestors.

Beyond ven­ture debt, the duo also plan to ear­mark un­der 10% of Al­te­ria Cap­i­tal’s fund for se­lec­tive, small eq­uity-based in­vest­ments (up to $1 mil­lion) in star­tups that have bor­rowed debt from them in the past.

“It is more about plug­ging the rounds so that a se­ries-B or -C round hap­pens faster. We just juice up and im­prove our re­turns,” said Murali.

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