Anicut Capital, an organized debt platform for bridge capital to SME’s recently launched its second structured debt fund called Grand Anicut Fund-2 (GAF 2). For this Anicut Capital has received a commitment of around Rs 600 crore and the total AUM (assets under management) has now crossed Rs 1000 crore. Its recent investments include ASG Eye Care Hospitals, Curatio Healthcare, Wow Momo, Wingreens and Akna Medical. In an e-mail interview IAS Balamurugan, managing partner, Anicut Capital discusses recent deals, its focus on SMEs, investment strategy and more. Edited excerpts:
What is the focus of Grand Anicut Fund-2? How different is GAF 2 from other debt funds in the market?
Grand Anicut Fund – 2 is a sector agnostic fund of Rs 1000 crore, including greenshoe option. Its focus is on providing debt to midsize companies with a turnover of Rs 100-500 crore. The cheque size will be Rs 15-100 crores with a tenor of 1-4 years.
We make investments in four broad categories – acquisition financing, promoter / buyback financing, growth capital and capital restructuring. Debt repayment schedule is prepared in accordance with projected future cash flows of the company. Our evaluation is done on a standalone credit basis rather than investing alongside Venture Capital funds.
How many and which all SMEs have you supported in India? How do you structure deals?
The debt fund has an AUM of Rs 1000 crore ($135 – $140mn) and has made 30 investments. The SMEs where we have made investments include Milky Mist, Bira, Curatio Pharma, Kaynes Technologies, Luker Electric, Manna Foods, Pricol Packaging, Lendingkart Technologies, Azure Hospitality.
We structure debt as per requirements of the founders. Debt repayment schedule is prepared in accordance with projected future cash flows of the company. We also provide a lot of synergistic benefits to the startups by connecting them with our ecosystem and help them raise further capital.
What is your typical time horizon for investment and what’s your rate of return? How has it been for the 11 exits you made?
The tenor for the investment varies from deal to deal and can be anywhere between 1-5 years. We have had 10 exits from Fund-1 and 2 exits in fund-2 till now. In Fund 1 exits the gross IRR (Internal Rate of Return) was approximately 20% and in Fund 2 exits, the gross IRR was approx. 21%.
In the first debt fund, we have already returned 30% of the investor’s principal and 80% of capital including the quarterly interest payments ahead of the end of our fund life. Fund-1’s DPI (Distribution to Paid-in capital) is 80%. (
recently released an AIF benchmarking report, according to which DPI for FY17 Vintage is 39%).
Our thesis is that we are giving capital to founders for a particular opportunity or to achieve a particular target and scale their business to a level where they can achieve a desired outcome. Thus, if founders are able to achieve these targets or scale to that level earlier than our estimated timeline, we accommodate them in taking an early exit.
How do you plan to deploy the current fund– and in which all sectors?
Both the debt funds GAF-1 and GAF-2 are sector agnostic funds, and we will continue to invest across sectors (except real estate).
What are the key things you look for in the companies you invest in? What are some of your recent investments?
The key parameters that we look for while investing are: The opportunity presented and potential growth of the company; Future cash flow generation; security structure; potential risks and mitigants; current cap-table. Some of our most recent investments are: ASG Eye Care Hospitals, Curatio Healthcare, Wow Momo, Wingreens, Akna Medical.
What new trends do you see in the venture investing space in India?
Mass digitization and the rise of investments in the D2C (Direct to Consumer) segment. We also see more investments in deep tech areas given the importance of advanced technology – Saas, robotics, automation, and advanced tech/ space tech, Fin-tech. The ecosystem and its enablers have grown significantly and with new ventures lined up for IPOs in the coming years, investors are getting the required confidence and are opening up capital to innovative and disruptive ventures.
Remote and digital recruitment can become the norm with the increased inclusion of AI and ML in the workplace. The significance of other essential tools like cloud computing is also becoming evident.