TVS Capital Funds (TCF) has completed 15 years in partnering with next-gen entrepreneurs, providing them with Capability Capital to support business building. During this period, the firm has transcended a journey spanning multiple businesses across diverse sectors and stages and has partnered with some of the best entrepreneurs.
TVS Capital, the Desi fund of India, well known as a leading rupee capital fund in India, is also a top fund of choice for many prominent family offices in India.
TVS Capital has constantly believed in backing companies in areas that closely align with India’s growth story. This philosophy becomes even more relevant and interesting as India looks at its next phase of growth backed by the foundation laid for a Digital India and the large-scale digitisation seen across consumer, enterprise & SME segment. This creates immense opportunity for technology driven innovation.
We had the opportunity to speak to Anuradha Ramachandran, Managing Partner at TVS Capital to understand a bit more on their strategy, style and outlook:
Q: We would like to understand the fund’s focus sectors within the overall macro driver of digitisation that TCF is focussing on.
A: We have disciplined focus on sectors as a strategy, we believe this creates depth of understanding, thought leadership and most importantly, makes our partnerships with entrepreneurs centred around long term business building objectives.
Across funds, we have progressively sharpened our focus on sectors and currently our investments are in 2 areas – financial services & supply chain orlogistics. Technology driven businesses is a central theme among most of the businesses that we have backed from our current fund – whether it is a Yubi that is building a unified lending infrastructure for banks or Increff that is in the SaaS for supply chain services space.
Our sector focus has helped enhance our right to win. We have seen this play out in TCF leading transactions alongside large marquee funds such as Sequoia, Goldman Sachs, while keeping our focus on the right stages.
Q: How has this strategy translated in terms of thematic areas that the fund is looking at for investments?
A: We basically look at 2 types of businesses within our focus sectors – core business enabled by technology (Digit would be a classic example) and tech businesses in these sectors (such as a Yubi in financial services and Increff in the supply chain tech space). In terms of thematics, we look at 10-12 of them across the sub-sectors of lending, payments, insurance, investments, banking infrastructure and supply chain tech. For example: the macro on credit under-penetration especially in the MSME, rural and consumer loans space is a dominant theme and we look at different elements of the value chain and how technology is solving for the pain points. In the insurance segment, the thematic for us is the larger under-penetration of the sector and more specifically, the need for physical touchpoints to drive penetration in the last mile, considering this is a push product. We took this thesis forward to invest in a tech-enabled distribution play in insurance.
Q: Will you continue double clicking on these areas and thematic as you continue investing from the current fund and future funds?
A: We have strong market recognition and capability capital in the focus areas that I spoke about earlier, we will continue to leverage this to develop new thematics in these sectors. Technology businesses is something we have been comfortable investing in, that theme will continue into our next fund.
From a future perspective, we will continue diving further into financial services, digital commerce and supply chain tech and spend time on 2nd order ideas within these. In the B2B Services space, we may explore a couple of more sub-sectors in addition to supply chain & logistics.
Q: We are new to this term “capability capital”, from the description of TVS Capital we understand this is a cornerstone of TCF’s investment strategy. Help us understand this term from the lens of TCF and its importance.
A: We have always believed in partnering our entrepreneurs not just with capital but also capability, which helps the founder in business building. Capability capital for TCF spans across the fund’s wide network of advisors, our board of directors, industry leaders, friends of the fund and the team. We have amongst this network, the CXOs of eminent organisations who work alongside our team not just on portfolio initiatives but also help them develop thought leadership in our focus areas.
Q: What are the key elements of our investing style?
A: Our investing style has been eclectic in nature and we believe in an idea-based investing philosophy. Our disciplined investment strategy is centered around the following pillars: (i) Founder Quality: partnering with the best entrepreneurs, which we define as “AAA” founders, who demonstrate Ambition, Ability to Attract Talent and Ability to Execute (ii) flexibility on stage to provide best-in-class risk-return to our clients: across funds we have transitioned from a bi-modal investment strategy (focussing on venture growth & late stage) to a tri-modal strategy (across venture growth, late stage and classic growth) (iii) business model traction
This disciplined style helps us anchor institutionalisation as a firm. In multiple areas, we have pushed up the bar for ourselves – whether it is our idea-based investment framework or proactive origination or data-driven origination.
Q: Which are some of the investments done by TCF that are unique and what makes them so?
A: We have had the opportunity to partner with multiple exemplary founders across our 3 funds – Falguni (Nykaa), Kamesh Goyal (Digit), Gaurav Kumar (Yubi) to name a few. Each of these businesses have been unique in different ways. One thing that makes these businesses unique is that they have been “category defining companies” either creating large new categories or significantly redefining business models in existing categories.
Q: Can you elaborate on the Limited Partnership relationship that the TVS Capital platform has?
A: We have been fortunate to have a good blend of contributions from multiple pockets of rupee capital – family offices, HNIs and institutions. Today, we are proud to count ~100 family offices and HNIs as our LPs. Our relationships with LPs has been synergistic – whether it is our co-investment programme or LPs who work with us on portfolio company initiatives. Of course, the foundation for these strong relationships has been top quartile performance demonstrated by the fund which has been a driving factor for most of our LPs doubling down on commitments in successive funds.
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