Mumbai: Chennai-based private equity firm TVS Capital Funds Ltd expects to hit a first close of around Rs700 crore for its third private equity fund by end of March, said founder chairman and managing director Gopal Srinivasan.
The fund—TVS Shriram Growth Fund 3—is targeting a corpus of Rs1,000 crore.
Srinivasan founded TVS Capital Funds in 2007, with TVS Group and Shriram Group as its sponsors. It invests in India’s mid-cap businesses and currently has assets under management of over Rs1,100 crore across its two previous funds.
From its previous funds, TVS Capital has invested in companies such as National Stock Exchange of India Ltd, Indian Energy Exchange Ltd, RBL Bank Ltd, City Union Bank Ltd, Wonderla Holidays Ltd and Nykaa.com. It has exited completely from RBL Bank and Wonderla.
RBL Bank went public in 2016, while Wonderla became a listed entity in 2014.
“The target corpus in this fund is higher at Rs1,000 crore, because we believe that what was Rs600 crore in 2011-12 is about Rs1,000 crore now. The third fund will focus on financial services, food and agriculture, lifestyle and leisure, and healthcare,” Srinivasan said in an interview.
TVS Capital has raised its funds largely from domestic investors such as family offices and institutions such as the State Bank of India, Life Insurance Corp. of India, General Insurance Corp. of India Ltd and others.
The latest fund will continue to build upon the strategy and draw from the learnings of its previous two outings, which the fund internally calls a “designed for India strategy”.
“When we started out in 2007, we decided to do classical early stage growth, buying minority stakes of 25-30% in unlisted companies. However, 2007-09 was a terrible time to do classic unlisted minority. It was the wrong strategy for that time,” said Srinivasan.
From being a minority investor, TVS Capital ended up owning two of its portfolio companies.
“Dusters Total Solutions—we built the company from Rs60 crore to Rs360 crore revenue and sold it to Security and Intelligence Services (India) Ltd. Similarly, with Texmex Cuisine, we took over the assets and now we have built a Rs100 crore business out of it,” said Srinivasan.
The firm, over the course of its second fund, evolved its strategy to focus on three different themes—best ideas, investing across stages and building platforms, which it calls the “Designed for India” strategy.
“In the second fund, we did three different things. We always liked this concept of best ideas. Our model is work a lot, think a lot before investing money. We think of spaces where there will be great demand in 5-10 years of time and ideally, some shortage of assets. That’s what gives you the delta of price over value,” said Srinivasan.
TVS Capital also shifted its strategy to focus on investing across stages.
“We decided we will do early growth, but only where we can see multiple rounds of financing over the future, such as our investment in Nykaa. In late stage, we adopted two strategies. One is late stage unlisted companies such as India Energy Exchange and the other is late stage active PIPE (private investment in public equity) such as Prabhat Dairy and DCB Bank, ” he said.
The third leg of the firm’s strategy is building platforms, by taking controlling stakes or backing a management team to do mergers and acquisitions and building a platform, such as in the case of Dusters, added Srinivasan.
To support this active, multi-stage strategy, the firm has built a team of experienced advisors such as P.M. Murthy, former managing director and chief executive officer of Asian Paints; K. Venkatachalam, former managing director of Kellogg Co. (India); and K. Natarajan, founder and chairman of IT firm Mindtree Ltd.
TVS Capital’s latest fund-raise comes at a time when the Indian private equity market has witnessed record investment activity of around $24 billion in 2017, according to data from private deal tracker Venture Intelligence.livemint