Asian investor PAG-backed Edelweiss Wealth Management (EWM) has launched a venture debt fund, Edelweiss Crossover Yield Opportunities Fund (ECYOF), to raise Rs 3,000 crore (around $361 million - including the green shoe option), the company said.
The close-ended Category II alternative investment fund (AIF) offers a proposition to make debt investments in emerging startups that makes equity-like returns with debt-like risks and regular cash flows.
“The fund is being launched when a funding slowdown has gripped the private capital markets, making founders and promoters more sensitive to equity dilution while having to ensure capital sufficiency for growth. ECYOF is a much-needed alternative that allows venture/private equity-backed high-growth companies to raise additional capital to augment equity financing and continue their growth trajectory,” Edelweiss said in a statement.
ECYOF will target a well-diversified portfolio by investing across growth stages starting from Series A and will be sector-agnostic.
The fund is being managed by Pranav Parikh, CFA, Managing Partner and Head, Private Equity and Gaurav Gairola, Senior Investment Director, who have investment experience of 25 years and 19 years, respectively, including significant exposure to credit strategies.
“With the launch of this fund, we extend our offering to help emerging start-ups and enterprises scale with a debt offering apart from our industry-leading equity funds…We will bring a full set of unmatched value-added services to our investee companies. These include growth capital solutions of debt and equity, ESOP financing for founders and management teams, treasury and forex expertise, as well as the ability to leverage our strong wealth relationships..,” said Pranav Parikh, Managing Partner & Head, Private Equity, Edelweiss Wealth Management.
ECYOF will aim to provide its investors with stable quarterly coupon distributions, facilitating liquidity and offering predictability of returns. ECYOF will aim to generate additional returns by monetising the equity optionality built into the product.
“ECYOF will be funding home-grown high-growth enterprises with home-grown capital,” according to Anshu Kapoor, President and Head – Investment Management at Edelweiss Wealth Management.
Kapoor further said, “As the private equity markets turn volatile, particularly in growth and late stage, many companies have turned to venture debt. On the other hand, investors are constantly looking to build a diversified, risk-adjusted portfolio that will give them the right balance between stability and attractive returns. ECYOF will participate in India’s thriving venture debt ecosystem, which is expected to become a $5 billion opportunity in the next few years.”
EWM is a leading wealth management firms with client assets of over $24 billion, servicing around 9.2 lakh affluent individuals & HNIs and about 2,770 of India's wealthiest families as of March end 2022.
EWM offers a suite of wealth management solutions, including investment advisory, estate planning, investment management, securities and broking for individuals and institutions, CXOs, professional investors and family offices.
Through its two late-stage growth equity funds Edelweiss Crossover Opportunities Series, the wealth manager has delivered returns in the range of 21%-35% over a five-year investment horizon. Fund I and Fund II launched in 2017 and 2018, respectively, saw investor raise a total of around Rs 2,000 crore.
It is also planning to raise up to Rs 3,800 crore (around $494 million) for its Crossover Opportunities Fund - Series III soon.
