New Delhi, May 15 -- Bengaluru-based growth-stage venture capital firm Avataar Venture Partners, which has initiated the process of raising capital for its third fund, has secured a financing package to support its general partner commitments and provide additional capital to portfolio companies.
The financing, which was structured across India and multiple offshore jurisdictions, including Mauritius, Singapore and the US, was provided by Rand Merchant Bank (RMB), the corporate and investment banking arm of FirstRand Ltd, one of Africa's largest financial services groups based in South Africa.
The $32-million (around Rs 307 crore) transaction combines a GP facility with a net asset value, or NAV, financing structure. The structure allows investment firms to borrow against the value of their portfolio assets, while GP facilities are typically used to support commitments made by fund managers into their own investment vehicles.
The capital will help Avataar continue backing portfolio companies while retaining exposure to future upside.
Mohan Kumar, founding managing partner at Avataar, said the firm required a financing solution "tailored" to its fund structure and "delivered with speed and certainty".
RMB said the structure combined financing at both manager and fund levels within a single framework and required coordination across multiple jurisdictions.
"We are seeing increasing demand from financial sponsors for flexible liquidity solutions that can support investment across portfolios as well as at fund level," said Siby Jose, senior transactor at RMB Leveraged Finance India.
Avataar, a growth-stage investment firm focused on technology-led businesses across sectors, including enterprise software and digital transformation, is targeting $400 million for its third fund. It had raised $350 million for its second fund, launched in 2022, which invested in 15 companies including Qpi AI, Finova Capital, and Interface AI.
To be sure, Avataar isn't alone in taking debt funding to meet its GP commitments. PE firm Gaja Capital, for instance, availed a loan from 360 One Prime Ltd to fund part of its sponsor commitment for its fourth fund, according to the draft prospectus it filed in December last year for an initial public offering. Gaja later refinanced that loan by taking on another loan, at a lower interest rate, from ICICI Bank.
Published by HT Digital Content Services with permission from VC Circle.