Indian venture debt fund reaches first close

Debut vehicle Trifecta Venture Debt Fund I has raised just under half of its Rs500 crore

Indian venture debt firm, Trifecta Capital Advisors, has raised around Rs200 crore ($30 million; €27 million) for the first close of its debut India-focused venture debt fund. The recently-established manager raised the capital from a range of domestic institutional investors including pension funds, a large life insurer and one of India’s largest endowments, managing partner Rahul Khanna, told PDI.

Domestic lender RBL Bank is the fund’s anchor investor with a Rs50 crore allocation to the vehicle which has set a hard-cap of Rs500 crore. Khanna said the firm will execute rolling closes each time it brings in another Rs75-100 crore in investment.

He added that so far investors are all domestic institutions or high net worth individuals but that there has been some interest in the strategy from foreign investors. Recent regulatory changes as well as promising government moves towards opening up the Indian economy to more foreign capital means that Trifecta will now look to raise money from outside India, he explained.

Trifecta Venture Debt Fund I is targeting net IRRs of 17-18 percent for investors, Khanna noted. The strategy makes loans of between Rs5-25 crore to venture capital-backed emerging companies. The facilities are typically amortising three-year deals meaning Trifecta can recycle capital into new deals as it amortises and matures over the fund’s seven-year lifetime. 

The loans are typically secured where there is collateral available though as the firm focuses on VC-backed firms in service-orientated sectors, assets are thin on the ground, Khanna said. Trifecta can also seek brand or share pledges, he added.

Alongside cash coupons of around 15 percent, the fund seeks equity upside. This is typically in the form of part-paid-up share options rather than warrants, which are less tax-efficient, Khanna said. 

Around half of Trifecta’s deal flow comes via referrals from venture capital firms that Khanna and his co-founder, Nilesh Kothari, have relationships with. They are also approached directly by growing firms seeking non-dilutive finance to support their latest funding round, he explained. 

Trifecta is the second venture debt shop in India. Innoven, previously a subsidiary of Silicon Valley Bank is now controlled by Temasek and is not open to third-party investors. 

Before setting up Trifecta, Khanna was a managing director at VC firm Canaan Partners. His resume also includes Clearstone Venture Partners. Kothari was most recently a managing director for ventures and acquisitions at global consulting firm Accenture as well as chief financial officer at Accenture Credit Services.