Exclusive: Trifecta Capital targets final close of $73.5m fund, to invest $11m by April

Rahul Khanna, Manager and Co-founder, Trifecta Capital

As venture debt picks up as an investment vehicle in India, Trifecta Capital Advisors, is gearing up for an active year as it aims to make the final close of its $73.5 million fund.

The venture debt firm had earlier targeted to close its fund in late 2016 after it announced the first close of its fund in September 2015 at Rs 200 crore of its initial target of Rs 300 crore, which came with a green shoe option of Rs 200 crore.

“We haven’t done our final close, what we had initially targeted was Rs 300 crore and green shoe of 200 crore, so a total target of Rs 500 crore. We have crossed our Rs 300 crore mark we are now marching towards Rs 500 crore,” Rahul Khanna, Co-Founder and Managing Partner at Trifecta Capital told DEALSTREETASIA.

“My sense is it could take another 3-odd months to get there, partly also because we have some in-bound interest from offshore investors and so far capital has not been a constraint for us. Even today we have a lot of headroom in the fund to deploy but my sense is that in the next 3-4 months we should be able to do our final close,” he added.

The firm’s debut fund is the first debt fund to be registered as a Category II AIF under the Securities and Exchange Board of India’s AIF (Alternative Investment Funds) Regulations. The first close, industry parlance for the threshold of capital that an AIF needs to raise to start making investments, comes about four months after the fund was approved by SEBI.

The fund’s investor mix includes private insurance companies, corporate foundations and large family offices. RBL Bank, which came on board with an initial Rs.50 crore commitment, is the anchor investor in the fund.

“We don’t use any intermediaries for fund raising. So from our time commitment standpoint we have been very focussed on capital deployment so we have been going slow on capital raising because we have to do all of it ourselves,” Khanna said.

“Second, our investors are large institutions and many have long decision cycles, so for many of our investors that we have been in discussions with continue to operate in cycles of 6-12 months. In fact, some of our investors have actually increased their allocation after the first close because some of the conversations that we are now having is to increase the allocations with existing investors like the others have done and others we have been dialogue for some time and some people just want to see the performance of the portfolio before they invested capital,” he added.

The slowdown in venture capital investment in 2016, Khanna says, is likely to have helped venture debt as an asset class as well as helped it to attract institutional investors that are now increasingly looking to invest in structured products to give them a higher IRR specifically on the debt side.

OUTLOOK FOR 2017

The venture debt provider is looking to deploy over Rs 75 crore ($11 million) in the three months of 2017 in four to six companies. Since it began investing in late 2015, Trifecta has so far made 17 investments commitments of a total of Rs 220 crore.

“2017 will be a bigger year for us, 2016 was a good start for us with 17 commitments and a couple of hundred crore deployed,” said Khanna.

Trifecta is looking at deploying of Rs 250-300 crore over the course of the year (2017). “And we will continue to consolidate our position in the market because of the quality of our portfolio. We are not necessarily looking to do the most number of deals,” he added.

In 2016, the Trifecta had invested around $3 million in online furniture store Urban Ladder and another $1.8 million in online B2B marketplace Industrybuying.com. Its portfolio also includes beverages manufacturer Paper Boat, online home design startup Livspace, drone manufacturer ideaForge, and healthcare firm Nephroplus among others.

Over the last one year, Trifecta has also cut larger cheques, beyond its initial planned range of Rs 5-20 crore. Without naming the company, Khanna said they have made at least one commitment to the extent of Rs 30 crore.

“The range for us, which was initially contemplated between Rs 5-20 crore, is going up to Rs 30 crore and we could also consider larger deals subject to the company being a leader or having raised significant equity along with our round of debt,” he said.

However, he added that Trifecta would maintain a diversified portfolio in terms of size sector and stage and not only focus on the late stage opportunities.

“The vintage year of 2016 is quite interesting for Series A because if a company got funded in 2016 and early part of 2017 then those are really high quality companies that have been able to raise money in these fairly difficult times. We will continue to be focussed on early growth stage companies but by design we will never be the first ones in,” he said.

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