Newly-formed Ascent Capital, which is a separate investment entity carved out of UTI Ventures, recently raised $350 million (Rs 1,575 crore) for its first fund. The fund is focused on growth capital and is advising and managing ITVUS Fund I, Ascent India Fund II and Ascent India Fund III. Director Ajay Mittal speaks to Shilpy Sinha about the fund’s strategy. Excerpts:
What will be Ascent Capital’s strategy?
Ascent Capital follows an entrepreneur-centric investment approach. We actively seek out promising Indian companies driven by visionary leadership. Our constant endeavour is to complement the strengths of the teams backed by us.
We leverage our expertise and market insight to spot emerging opportunities with dynamic growth trajectories. We have time and again demonstrated our ability to recognise and support companies that have transformed into industry leaders. We believe in long-term partnerships.
From raising additional capital, attracting senior management talent, maintaining high standards of corporate governance, preparing companies for successful public offers to providing advice on inorganic growth plans, we leverage our experience and network to drive the success of every company we back.
Unlike earlier, are investors showing interest in funding individual teams? Will this spin-out model catch on in the Indian market?
Foreign investors (limited partners or LPs) like endowment funds, university funds, pension funds and fund of funds typically prefer independent investment managers (general partners or GPs). Any GP with the requisite track record, experience of working together as a team and showing skin in the game is preferred by these foreign Investors.
Was raising the fund a challenge? Did you tap the overseas market this time?
Ascent India Fund III (AIF III) is the third fund raised by our team. We have had overseas investors in the previous fund (Ascent India Fund – Fund II). The year 2009 was a wrong time for raising funds. However, what helped us was our track record as well as the fact that our team is one of the most experienced in this asset class and has worked together for a long period.
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How do you look at the fund-raising scenario this year? How many investments will you be looking at this year?
Considering the adverse market conditions prevalent in 2008 and in substantial part of 2009, we consider 2010 as an appropriate time for companies on high growth trajectory to raise growth capital. It would be difficult to put a number to deals we will be doing this year, as it depends on how many deals sourced by us meet the investment criteria. We would be investing our funds over the next four years or so. We look at an ideal deal size of $15 million to $20 million.
Which are the sectors that you intend to focus on?
We prefer to invest in sectors that address domestic demand driven by a fast growing consumer market, services sector that benefits from India’s infrastructure boom and those sectors that leverage India’s outsourcing strengths in services and manufacturing.
How do you look at the recent SAT ruling on Subhkam Ventures and MSK Projects, which talks about veto rights to shareholders and which does not mean control over the company?
It is a welcome ruling considering that financial investors (such as venture capital and private equity) with significant minority stake don’t intend to run the company and the veto rights are nothing but negative covenants to protect their interests.