TR Capital sees over $200 mn annual investment opportunity in India

“We firmly believe that there is an immense opportunity in India and that there is room for TR to invest at least $200 million yearly in the Indian secondary market," TR Capital’s managing partner Frédéric Azemard told Mint in an interview. "The economy has solid fundamentals driven by factors such as a growing young and middle-class population and infrastructure, but more importantly very high-quality companies."

With an average ticket size between $30 million and $100 million, nearly 50% of TR’s portfolio is India-focused, said Azemard, who is also based in Hong Kong.

Founded in 2007, TR Capital specializes in secondary investments across the Asia-Pacific, managing about $1.5 billion across four funds. Currently deploying its fifth fund, TR Capital has offices in Singapore, Mumbai, Shanghai, and Delhi, and has made 43 secondary investments.

Earlier this week, TR Capital participated in a $90 million fundraising round in consumer lending startup Fibe alongside other investors, including Trifecta Capital and Amara Partners. Other existing investors, such as TPG Rise Fund, Norwest Venture Partners, and Eight Roads Ventures, also participated in the round, which included a combination of primary and secondary transactions.

Formerly called EarlySalary, the fintech startup offers personal loans in categories such as healthcare, edtech, insurance & school fee financing among others. While TR Capital primarily invests in sectors such as technology, consumer and healthcare, Azemard added that the rise in digitization and the overall increase in consumer spending has created many growing sub-segments with large decimal markets and the “digital consumer lending investment is a very good example of this."

Some of TR’s other Indian portfolio companies include footwear retailer SSIPL, restaurant operator Sapphire Foods and Hydrebad-based biriyani chain Paradise Food Court. 

Azemard highlighted the potential for Indian companies like Lenskart, which has expanded internationally, to expand beyond India once they reach a certain scale and business maturity.

Surge in secondary markets

Azemard also observed the rising significance of secondary markets in India. While secondary markets are more established in the US and Europe, India is improving, generating considerable investment interest. “The need for secondary is growing and India is generating a lot of investor interest today."

With more new-age companies going public in recent years, the market for secondary investments has also become larger. “The market is even broader for us now as there is more visibility on future exits through IPOs. There is more assurance when it comes to liquidity, so this is expanding the addressable opportunity for us in the country," said Azemard. 

Bain & Company's report on India Private Equity, which supports this view, highlighted a 15% increase in exit value to about $29 billion, with exit volumes rising to nearly 340 from about 210 a year earlier. This was driven by public market sales (notably block trades) which comprised half of exits by value and they benefited from increasingly deep Indian public markets, the report said. 

Despite the slowdown in dealmaking, India is playing an increasingly significant role in Asia-Pacific PE-VC activity. It accounted for about 20% of all investments in 2023, up from about 15% in 2018. 

“This has led to a rise in capital from both domestic and global/regional funds, who are now diversifying across various sectors and asset classes within India," Bain said in the report. 

Other global investors such as Pantheon Ventures and HarbourVest Partners have also concurred with the improving exit avenues and the robust potential of the Indian economy. The two investment firms along with LGT Capital Partners anchored private-equity firm Chrys Capital’s $700 million continuation fund in April. 

Also Read: London’s Pantheon Ventures to ramp up investments in India

Last year, TR Capital also invested in a $150 million continuation fund with Samara Capital alongside other investors such as Axiom Asia, Stepstone Group and Unigestion. 

In this transaction, Samara sold stakes in three firms- medical devices firm Sahajanand Medical Technologies, staffing firm First Meridian and Paradise Food, to this continuation vehicle. Historically, TR Capital’s strategy has been to allocate about 50% of its fund towards direct secondary transactions and the remaining towards continuation vehicles. 

Mint reported last month that other investment firms, such as India Quotient, Multiples, Kae Capital, and Westbridge, are also evaluating continuation funds. These funds seek to stay invested in successful companies while giving their backers an exit route. 

“It is definitely a very interesting strategy. Liquidity has always been an issue in Asia and the IPO markets are relatively new in India," Azemard said. 

There could be constraints between investors that came in early and the need at some point to generate returns quickly since not all companies will be able to float an IPO within a specific fund cycle, he said. "So, continuation funds are increasingly becoming a solution to generate liquidity. As the Indian markets mature, there will be more of them like this."