Foreign Investors Shown Interest In Rs 500 Cr Fund: Mr. Girish Gupta
With lot of critical reform measures being initiated by the new NDA government and the economy on the mend, buoyancy is also returning to the private equity and venture capital industry. In an interaction with the Business Rankers’ editor-in chief Moolchand G. Chahar, the chief executive officer of Rajasthan Venture Capital Fund Mr. Girish Gupta said fund raising has become a little easier as there is renewed interest in India. The Rajasthan-headquartered fund is raising Rs 500 crore for its MSME Growth Fund RVCF III and Mr. Gupta said they are in serious dialogue with international financial institutions and sovereign funds. RVCF has received commitments from some of them already, added Gupta.
CVF is in the midst of raising Rs 500 crore for its third fund. How much you have raised and what is the roadmap in terms time-frame for tying up the whole corpus?
We are looking to be operational with Rs 300 crore initial fund close by Q1 2015. This will be followed by further fund raising of Rs 200 crore under ‘Green Shoe Option’. Conservatively speaking, we expect to announce final closure by Q4 FY 2015.
What are the potential sources you are looking to tap?
Our existing contributors to SME Tech Fund (15 in number) are the first point of contact for the MSME Growth Fund RVCF III. Further, we are in serious dialogue with international financial institutions and sovereign funds. We have received commitments from some of them already.
How easy or difficult is the current environment for fund raising?
Considering the stable government at top, easing inflation, as compared to last couple of years and overall positive vibe in the business environment, things are looking bright at fund raising side too. Foreign LP’s are also showing renewed interest in India.
What would be the investment theme of the fund — category of companies and sectors?
RVCF III will be an MSME focused fund with an ascent on IT/ITEs, healthcare, education, logistics and food processing sectors. The fund also has a provision to invest up to 10% of the corpus in startups at seed stage or early stage with ticket sizes between Rs 25 lakhs – Rs 1 crore.
You have already exited from 9 out of the 10 companies in the portfolio of the first fund of Rs 16 crore. How has been the returns?
Returns from the both funds have been encouraging. Our second fund which is still running has some investments in terms of value grown more than 5 times since investment.
What is the status of your second fund with regard to investment, number of companies, exits and returns?
SME Tech Fund RVCF Trust II has so far invested in 12 companies and exited out of 4 with an average investment IRR of 16%. We are looking to invest in a couple of more companies pretty soon.
Can you highlight some of the success stories?
From RVCF II, Leeway Logistics, a Mumbai-based 3PL provider has been a star performer. The company’s topline has grown more than 7 times since RVCF investment and is now looking to raise further funds from top PE/VC players in the country. From RVCF I, we invested in Natural Technologies, a banking software solution provider which supported RRB’s with its products. RVCF I exited through sale of its stake to HCL Infosystems. Another success story is a retail company ‘Home Store’ which was bought out by ‘Spinich’ Dewan Housing Finance Group, providing RVCF decent returns.
You have already said that RVCF is a pan-India focused fund. But what is your view about opportunities in Rajasthan?
We have seen VC/PE activities in Rajasthan growing during our existence of 12 years. Overall entrepreneurial ecosystem has come up nicely over last few years. Rajasthan falls on the Delhi-Mumbai-Industrial Corridor and is strategically well located to cater to different growth centres of the country. Local IT, tourism, handicrafts, solar and wind power sectors offer great opportunity to both investors and entrepreneurs.
In hindsight, do you regret any investments that you should have avoided?
The entire VC industry operates on law of averages, with some investments providing block-buster returns and some average and some losing money. It’s unfair to pick any one bet for failure. Over last decade of our existence, we have seen economic slowdown across the world and in India, some sectors which looked promising earlier didn’t deliver and hence the opportunities within those sectors.
Lot of money is coming to Indian e-commerce industry. Will you look at that sector given the current elevated valuations?
There is a reason for money chasing the Indian e-commerce industry. The canvas is wide-open and things have just started happening. There is much more to be done. With growth rate of almost 70% over last year, e-commerce is poised to touch $6 billion in revenue by 2015. From Indian context, valuations of few companies may appear to be at higher levels, but as compared to global peers, it does make sense. We see huge scope for e-commerce enablers and innovations around it.