Avendus Launches INR 4,000 Crore Structured Credit Fund to Fuel Mid-Market Growth

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Avendus Group, through its asset management arm Avendus PE Investment Advisors, has announced the launch of its third private credit fund, Avendus Structured Credit Fund III (ASCF-III). This fund aims to raise a corpus of INR 4,000 crore, including a green shoe option of INR 2,000 crore, targeting investments in secured credit transactions for both operating and holding companies. Focusing on diverse sectors such as pharmaceuticals, healthcare, manufacturing, consumer, chemicals, and technology, the fund plans to deliver a target gross portfolio internal rate of return (IRR) of 16-18%. Avendus Group’s commitment to addressing India’s mid-market enterprises’ credit needs highlights its leadership in the private credit space.

Introduction to Avendus and Its Private Credit Model

Avendus Group is a prominent financial services firm founded in 1999 in Mumbai, India. It operates across investment banking, institutional equities, wealth management, credit solutions, and asset management. The group has expanded its presence to 10 cities globally, including locations in India, the US, and Singapore. Avendus PE Investment Advisors, the asset management division of the group, manages its private credit funds, focusing on structured credit solutions for mid-market enterprises.

Revenue Model and Fund Strategy

Avendus’ private credit platform generates revenue by providing customized credit solutions to growth-oriented companies and their promoters. Its funds target secured credit transactions, emphasizing capital preservation while achieving high returns. The newly launched ASCF-III will invest in:

• Secured credit transactions for operational and holding companies.
• Select hybrid structures based on specific deal requirements.

The fund’s strategy includes building a diversified portfolio of 12-18 transactions, each valued between INR 200-500 crore, and leveraging Avendus’ extensive corporate relationships to identify investment opportunities.

Background of Avendus’ Private Credit Funds

Avendus entered the private credit market over a decade ago, becoming one of India’s leading platforms in the segment. With over 100 deals worth INR 12,000+ crore executed across its funds and non-banking financial company (NBFC), Avendus has established a robust track record in structured credit solutions.

Performance of Previous Funds

• ASCF-I: Launched in October 2017, it deployed capital across nine transactions, achieving an 18% IRR before returning the full capital in June 2022.
• ASCF-II: Launched in January 2022, it deployed funds across 14 transactions with an expected IRR of approximately 17%.

Avendus Structured Credit Fund III (ASCF-III)

Key Features

• Corpus: INR 4,000 crore, including a green shoe option of INR 2,000 crore.
• Focus Sectors: Pharmaceuticals, healthcare, manufacturing, chemicals, consumer, technology, and B2B businesses.
• Portfolio Goals: 12-18 transactions with an IRR target of 16-18%.
• Deal Size: Typically between INR 200-500 crore.

The Growing Demand for Private Credit in India

India’s mid-market enterprises increasingly rely on private credit for financing due to its flexibility compared to traditional debt and equity. Over the past three years, private credit deals in India have exceeded USD 20 billion. The segment bridges the financing gap for businesses, offering tailored solutions for growth and strategic needs.

Nilesh Dhedhi, Managing Director of Avendus Finance, emphasized the role of private credit in enabling enterprises to access capital without diluting equity. The growing sophistication of India’s financial ecosystem further enhances the attractiveness of this asset class.

Insights from Industry Leaders at Avendus

Kaushal Aggarwal, Co-founder of Avendus, stated that the company’s strength lies in its sector expertise and corporate relationships. This foundation allows Avendus to offer differentiated investment opportunities and deliver attractive outcomes for investors.

Anshul Jain, Executive Director of Avendus Structured Credit Funds, highlighted the success of the first two funds, stating that the launch of ASCF-III is well-timed to capitalize on increasing demand from investors and businesses. Jain emphasized the group’s ability to scale its strategy and deliver strong risk-adjusted returns through specialized underwriting and active risk management.

Learnings for Startups and Entrepreneurs

1. Diversified Revenue Models: Businesses can explore diversified revenue streams, such as private credit, to address market gaps.
2. Sector-Agnostic Approach: A sector-agnostic strategy can provide resilience and adaptability to changing market dynamics.
3. Focus on IRR: Targeting high internal rates of return while ensuring capital preservation is a key investment strategy.
4. Customized Solutions: Offering tailored solutions can help address unique client needs and build long-term relationships.
5. Building Track Records: Establishing a track record of success in early ventures can attract greater investor confidence.

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