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Caspian wants Rs 600 crore to try its novel instruments funding

New funding model will help founders in need of short-term funds in social and environmental fields

, ET Bureau|
Updated: Apr 19, 2018, 08.16 AM IST
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Among its four funds, Caspian saw fastest growth in its debt fund where it raised Rs 500 crore and has already deployed around Rs 350 crore.
HYDERABAD: Caspian, which has set up four impact funds to invest in startups in social and environmental fields, is looking to raise Rs 600 crore of funds to invest in startups through novel debt instruments to help startup founders in need of short-term funds and hesitating to part with equity.

The Hyderabad-headquartered fund that invests in early and growth-stage enterprises has so far raised over Rs 1,500 crore and invested most of those funds in more than 100 startups with 16 equity exits, including two IPOs.

The four funds include Bellwether Microfinance Fund, India Financial Inclusion Fund, Caspian Impact Investments and Caspian SME Impact Fund.

Caspian has provided Rs 1,500 crore of funding to over 100 companies as equity and debt and it currently has around Rs 1,100 crore under management. Having invested most of its funds in equity of startups that include Ujjivan SFB, Janalakshmi SFB, Equitas SFB, Aptus Value Housing Finance and Micro Housing Finance among others so far, Caspian is now preparing a shift in investment strategy.

S Viswanatha Prasad, managing director of Caspian, said the proposed Rs 600 crore would be raised between the debt vehicle and a third equity fund “out of which about Rs 400 crore is to be invested as debt and Rs 200 crore as equity.”

He told ET, “The fundraises are expected to be made from across a number of varied sources like development finance institutions, impact investing funds, domestic banks and NBFCs as well as offshore funds. This time around, we are expecting increased participation from the domestic institutions.”
Caspian already has relationships with DFIs like FMO (the Netherlands), SIDBI Venture Capital (India) and OPIC (USA), CDC (UK) as well as impact investors like Triodos Impact Investment (the Netherlands), Gray Ghost Fund (USA), apart from domestic public and private sector banks and NBFCs.

At present, the volume of assets under management between debt and equity is almost equally split. Going forward, Caspian is looking to invest higher investments in debt business though it would continue to make equity investments into high potential companies in financial services, food and agriculture and clean energy, said Prasad.

Among its four funds, Caspian saw fastest growth in its debt fund where it raised Rs 500 crore and has already deployed around Rs 350 crore. “Of around Rs 1,500 crore that we raised so far, nearly Rs 1,000 crore went into equity investments,” he said, adding that “The early stage startups in newer sectors require a lot of debt with ability to generate cash within a few years but hesitate to dilute stakes at that juncture. That is our sweet spot.”

Avishek Gupta, vice-president of Caspian, said the existing banking system is not equipped to understand debt funding needs of new age startups into services business that suffer from lack of adequate assets to offer collateral.

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