IIFL Wealth, the wealth management arm of the diversified financial services group, will launch a Rs 750 crore fund-of-funds (FoF), that will partner tech-focused VC funds in the country to invest in their portfolio’s best performing digital companies.
The FoF, which will be raised from the company’s ultra-high-net-worth individual (UHNI) clients, will be used to help these fast-growing companies meet their next level of capital requirements, a senior company executive said.
Although investments through FoF are common in the West, especially in the Silicon Valley, it has yet to pick up pace in India. IIFL is one of the first funds to adopt this strategy to deploy capital.
“The IIFL Equity Opportunities Fund aims to provide a unique opportunity to invest in the best-in-class technology-focused VC Funds primarily providing follow on capital to their top-performing digital companies along with other marquee investors,†Umang Papneja, CIO of IIFL Wealth, said.
The follow-on capital will be for companies in the fintech, ed-tech, med-tech, ecommerce and mobility sectors that are looking to raise Series B funding and higher, the company said.
The category III AIF (Alternative Investment Fund) is already in talks with funds such as Orios, Blume and Kae Capital and has reached out to other funds as well. “We have already got commitments worth Rs 150-Rs 200 crore for the new fund,†Papneja said.
This is IIFL’s second fund after it raised a Rs 400-crore fund in 2015 to invest in digital companies.
“The previous fund is completely deployed, and we have started returning capital to its investors,†Papneja added.
Through the first, it invested in funds including Blume II, India Quotient II, Kae Capital, India Alternatives. The fund also made direct investments in companies such as Uniphore, Fynd, and NeoGrowth.
Typically, a VC fund has a clear mandate from investors (Limited Partners) to not exceed a certain cheque size in a company. But in high growth companies, the capital requirement can go beyond what a VC is able to provide. In such cases, partnering with FoF to further back their best performing portfolio companies is a win-win situation for all stakeholders.
In the last eight to 10 years, a lot of homegrown funds have raised capital from Indian HNIs and family offices that have been looking to back some of these high growth start-ups in the country. Apart from global capital, domestic capital has also been a big driver for VC investors in India.
In 2018, IIFL Wealth launched a fund in association with Blume Ventures, called the Blume Ventures (Opportunities) Fund IIA, with a capital commitment of Rs 300 crore.
Some of the companies that the fund has backed are Unacademy, Grey Orange, Dunzo, Turtlemint, Servify, Purplle, Intrcity, Milkbasket, Cashify and Tricog.
