Debt financing firm IntelleGrow, which operates as a nonbanking finance company (NBFC) and provides debt for working capital needs of early-stage, high-risk small and medium enterprises, is looking to launch a Rs 200-crore debt fund by the end of this year, according to ET.
The fund will operate as another business under IntelleGrow and will function as a category-II alternative investment fund unlike the firm which is an NBFC.
An Alternate Investment fund (AIF) is a Sebi-regulated investment vehicle, which aims to pool in funds for investment in the form of venture capital, private equity, hedge funds, and real estate investment trusts, among others.
IntelleGrow is a part of Aavishkaar-Intellecap group and hosts a pool of investors such as Michael and Susan Dell Foundation, Omidyar Network, fund manager DWM, Triodos Bank, Shell Foundation and Omidyar Network.
However, the firm is not looking to raise capital for the debt fund from existing investors. It has been in talks with other global and domestic players including banks, family offices and sovereign wealth funds.
Currently, as an NBFC, the debt financing firm offers SMEs, working capital financing. It typically invests between Rs 75 lakh and Rs 10 crore with an average ticket size of Rs 2 crore for firms.
Through the fund, IntelleGrow is looking to extend longer term loans to its clients.
“We typically offer working capital loans for 24-36 months with EMI-based repayments. We would offer more long-term loans ranging 24-48 months, with a possible bullet payment structure,” said CEO Akbar Khan.
The fund will now invest in firms opting for higher ticket sizes that would start at Rs 2 crore.
“We are looking to double the assets under management, not necessarily by increasing the number of deals but rather by increasing ticket sizes,” said Khan.
Till fiscal 2016-2017, the debt financing fund had about Rs 315-320 crores in assets under management (AUM) and is looking to end FY18 with at least Rs 640 crores in AUM.
The investment method is drastically changing in the country from capital to debt investment. Venture debt offers an attractive asset class for startups and SMEs looking for financing without having to dilute equity stakes.
Temasek-backed Innoven Capital, the largest venture debt player in the space, along with domestic venture debt fund Trifecta Capital compete with IntelleGrow, all having ramped up their pace of lending over the past year.