Equentis looks to launch a Category II debt fund for small-town clients

Equentis Wealth Advisory Services Ltd is looking to launch a ₹500-1,000 crore category II debt fund, focussing on tier I and tier II markets, a senior company official said.

The debt fund, which will look to back startups in India, will complement the firm’s recently launched ₹500 crore equity alternative investment fund (AIF). 

Manish Goel, managing director of Equentis Wealth Advisory Services, said the firm is in the process of applying for the fund to the Securities and Exchange Board of India (Sebi). “We have captive clients from whom we will raise this debt fund.” 

In December, it launched its maiden angel fund, a Category I AIF of ₹500 crore, to invest in high-growth early-stage startups. With the fund, the firm plans to invest in around 40-50 startups in the pre-series A and bridge-to-series A stages. 

Goel said that from the equity fund, the firm is looking to write cheques worth ₹4-10 crore for companies in sectors such as defence, consumer tech, deep tech, logistics tech, fintech, and artificial intelligence. 

Equentis has around 50,000 clients and actively manages around ₹3,000 crore of funds. Its clients invest anywhere between ₹10 lakh and ₹50 lakh. 

This angel fund is being pooled from its select wealth advisory clients, said Goel. “We have already got a commitment for the equity fund from around top 200 of our clients,” he said, adding that the debt fund, too, will be targeted towards these clients who want to participate in wealth-creation opportunities that were, until now, only available for the high-net-worth and ultra-high-net-worth individuals (HNIs and UNHIs). 

“The idea is to democratize access to opportunity for investors sitting in tier I and tier II cities in India who are equally ambitious and are beginning to understand that nuanced products,” Goel said. 

“With financial literacy and tech coming into play, those from tier II markets also have access to sophisticated financial products, and we are focusing on that layer, Goel added. 

According to Goel, if the client mix between metro and tier II was 80-20 earlier, it has now changed to around 60-40, highlighting the growing participation from the neo-rich in small towns in India. 

Most debt funds have been raised from UHNIs and institutional investors. Some of the key players in the venture debt industry include Stride Ventures, Trifecta Capital, Alteria Capital, Innoven Capital, Anicut Capital, and Blacksoil, among others. 

The Indian venture debt market, despite economic disruptions, experienced remarkable growth, reaching a record high of $1.2 billion in the calendar year 2023, up 50% from the previous year, showed the Stride Ventures’ 2024 report. 

With approximately 175-190 deals recorded, the venture debt deal space in India has demonstrated a compound annual growth rate of around 34% since 2017.