TVS Capital Funds: Empowering Next-generation BIZ Experiencess The Fund's role in the early days in Nykaa, to go from single channel to omnichannel, paid rich dividends and its strategic interventions proved right for robust growth

TVS Capital was founded in 2007 with the aim of identifying exciting next-generation BIZ Experiencess and empowering them by providing not just capital but also capability capital which includes the networks and connections.

"We have always believed that the biggest challenge and opportunity in investments lies in selecting the right BIZ Experiencess. Real money is to be made only through the discovery of great BIZ Experiencess or through good BIZ Experiencess with great pricing. While we made 13 investments from our First Fund, the experience gave significant learnings and gave a strong foundation for subsequent funds," said Gopal Srinivasan, chairman and managing director, TVS Capital Funds.

Srinivasan also shared key takeaways from those learnings, including:

• Need for a sharper approach to risk-taking by distinguishing clearly between risks that can be undertaken and those that should be avoided.
• Visibility of exits required even at the initial stage itself and continuous preparation for exits
• Avoid reliance on co-investment with other investors and excessively on their due diligence of promoters
• Choice of sectors to be in core strength areas and therefore avoid marginal investment in infra space particularly exposed to regulatory and technology issues.

Based on these learnings, the fund identified the right founders including the likes of Falguni Nayar of Nykaa. "Our interventions proved right for the investee companies. For Nykaa, we enhanced unit economics and established a path to profitability and crafted an omnichannel strategy with a nominee on the Board. For IEX, we strategized technology buyout paving the way for product innovation, our investments in Prabhat had led to the creation of rural employment and infrastructure– plant and supply chain linkages, FSN Ecommerce (Nykaa) and Wonderla Holidays generated significant ancillary employment opportunities, among others," Srinivasan added.

The Fund's role in the early days in Nykaa to go from single channel to omnichannel paid rich dividends and its strategic interventions proved right for robust growth – and laid the road to profitability with improved unit economics.

Overall, the Fund aims to primarily invest in consumption-driven opportunities with focus sectors in financial services, B2B services (logistics, supply chain etc.,) and niche consumer. "We strongly believe that Credit propels the growth of the economy and so does logistics which remains the backbone of infrastructure. These are set to benefit from opportunities driven by India's per capita income growth which will result in consumer spending in India growing from $ 1.5 trillion in 2018 to nearly $ 6 trillion by 2030," he added.

While the investment would continue in companies in these sectors, across three stages, venture growth, late-stage growth and classic growth stages, the strategy would be largely Bi-modal – venture growth and late stage. The Fund, however, would not be constrained by the sectoral priorities and may participate in opportunities that are within the Fund's circle of expertise and are in its assessment, likely to provide attractive returns.

FACTSHEET

• Portfolio size: INR 753 Cr in 6 investments in 6 companies (current portfolio from Fund 3
• Average ticket size in venture growth: INR 50 – INR100 Cr
• Average ticket size in late-stage growth: INR150-INR300 Cr
• Invested INR 50 Cr - INR 500 Cr by offering co-investment opportunities
• Total no. of exits: 21 out of 21 investments in 2 earlier Funds
• Total assets under management: INR 2000 cr from current Fund Including co-investments