Welcome to our ‘Fund in Focus’ series where we profile our member funds, underscore their investment philosophy, and highlight some of their interesting work. Today we speak to Ashvin Chadha, Managing Partner & Co-Founder, Anicut Capital. He throws light on how Anicut Capital prioritizes India's digital ecosystem, leveraging its vast potential while navigating challenges with a strategic, selective approach. The fund remains optimistic about India's startup landscape despite market fluctuations, focusing on sustainable, high-growth ventures for long-term success.
Fund in Focus: Rising from the Dry Powder: Anicut Capital's Strategic Approach to India's Start-up Surge
Spokesperson: Ashvin Chadha, Managing Partner & Co-Founder, Anicut Capital
1. What is the core mission and philosophy behind Anicut Capital?
Anicut Capital is an asset management company managing multiple AIFs across both debt and equity strategies. Anicut currently manages three debt funds (GAF-1, GAF-2, and GAF-4), a seed fund (GAAF), and an early growth equity fund (GAF-3), with a cumulative AUM of Rs 3,000 crores and has invested in early and growth startups and MSMEs. Anicut's portfolio includes companies like Milky Mist, Wow! Momo, Axiscades, Kaynes, Bira, Sugar Cosmetics, Wingreens, Blue Tokai, Sharechat, Mcaffeine, Milky Mist, XYXX, Curatio Healthcare and Agnikul, among others.
The name "Grand Anicut" draws inspiration from the ancient engineering marvel "Kallanai", one of the world's oldest functional water regulating structures in Tamil Nadu, India. As a specialized alternative investments firm, Anicut embodies the principles of innovation, excellence, and resilience showcased by Kallanai. We seek forward-thinking companies poised for growth in India to generate long-term value for our investors, and partners. With a collaborative and partnership-oriented approach, Anicut is committed to fostering success in its investments and making a positive impact on communities and the world
2. How does Anicut Capital spot its ‘winning start-ups’?
Our criteria vary across our 3 investment strategies – seed, early growth, and private credit
In the seed stage, since the companies are early-stage and don’t have a lot of history, we spend a lot of time understanding the founding team quality, their past experiences, clarity of the long-term vision, ability to execute and overall “mentor-ability” of the founders. We like large and growing markets both in India and abroad and companies that have a unique patent/IP or unique approach to solving a problem
In the early-growth stage (Series A), we look at businesses with a proven and scalable business model, established product market fit and sustained traction and growth. We like businesses with high gross margins and sustainable cost structures with acceptable levels of burn and a clear path to profitability
In private credit, we look for businesses that have demonstrated consistent growth and profitability through the years. We like businesses that are emerging as market leaders in their respective verticals and have reputed promoters with high levels of integrity and market credibility. Importantly, we look for consistent cash flows and profitable business models that have the opportunity for continued margin expansion and cash flow generation.
3. Anicut Capital last year raised funds from HDFC AMC’s Fund of Fund. Tell us how the fund plans to deploy the capital.
Anicut Capital’s Equity Fund received a significant commitment from HDFC AMC's Fund of Fund last year. The investment will be made from HDFC AMC’s Select AIF FOF-I which invests in Category I and II Venture Capital/Private equity-oriented AIFs. Anicut’s Equity Fund was launched in June 2022, with a total corpus of Rs. 500 crores, including an additional Rs. 250 crore green shoe option.
The capital will be deployed in early growth companies across various sectors by Anicut Equity Fund. The fund has already deployed over Rs. 150 crores in seven promising companies, including Blue Tokai, Earth Rhythm, Neeman’s, XYXX, Wheelocity, The Ayurveda Experience (TAE) and Illumine-i and aims to pursue early growth investments in a total of 12-14 companies, both within and beyond Anicut’s seed portfolio. The fund's focus is on diverse sectors such as Consumer, Internet, Technology, and B2B among others.
4. How do you navigate challenges in the ever-evolving landscape of investments?
We have an agile, strategic, and adaptive approach towards investing and are constantly trying to learn and stay abreast of the latest trends and developments. We conduct thorough market research to understand current trends, regulatory changes, and emerging opportunities. We have now accumulated deep expertise in specific sectors or industries to identify promising investment opportunities. We look to build strong relationships with local partners, co-investors, and industry experts to gain insights into the market and access deal flow. Being a sector-agnostic fund investing across stages, our breadth of capabilities and large network enable us to leverage the knowledge and resources that reside in our ecosystem.
5. What excites Anicut Capital about the ‘India opportunity’ in the growing digital ecosystem?
India has a massive and rapidly expanding population, making it one of the largest consumer markets globally. The increasing adoption of digital technologies, rising disposable incomes, and a burgeoning middle class present a vast market for various products and services, especially in the digital space. India has also undergone a significant digital transformation across sectors such as finance, healthcare, education, and e-commerce, driven by the “India Stack” of public digital infrastructure. Increasing internet penetration, driven by affordable smartphones and data presents a huge opportunity for digital businesses, including e-commerce platforms, fintech companies, and content providers, to reach and serve a broader audience. D2C, space-tech, clean-tech, and tech services have been some sectors of interest in the recent past and we feel these sectors will have some extraordinary businesses
While the ‘India opportunity’ is promising, we also recognize unique challenges to India, such as regulatory complexities and competition. However, our overall optimism stems from the belief that the evolving digital ecosystem in India has the potential to drive substantial ROI for those willing to navigate and invest strategically in this dynamic market
6. Share some of your portfolio companies recent work which you are extremely excited about
Neeman’s: Neeman’s is India's largest emerging sustainability-oriented footwear brand. The five-year-old company makes footwear from Merino wool, organic cotton, recycled PET bottles, and recycled tyres. We are particularly excited that the company recently forayed into the offline channel with a new store in Hyderabad and is getting a tremendously positive response.
CapGrid: CapGrid is a Gurugram-based automotive and industrial sourcing and procurement technology start-up. We are very excited that they have outlined an ambitious future growth strategy. aims to solve OEMs’ complexity challenges with respect to low-value parts such as fasteners, gaskets, bearings, and wiring connectors among other small components that belong to the tail (approximately 10-15%) of an OEM’s direct material spend in production of a new vehicle.
Agnikul: Agnikul is a space tech startup specializing in the design, manufacture, testing, and launching of orbital-class rockets. The company has strong IP around the world’s first 3D printed rockets. We are excited that preparations are in the final stages by for the maiden launch of India's first-ever private launchpad and the second rocket launch by a private sector player
Illumine-i: Illumine-i: Illumine-i is a leading sustainable design and engineering firm that started with a focus on designing low-voltage power plants. In the past few years, Illumine-i has become the leading player in its category, offering structural & electrical engineering expertise for power plants (LV, MV, HV), power storage devices, distribution components, infrastructure projects and project delivery consultancy.
7. Reeling from the funding winter, there is record dry powder with a high potential for investing in the Indian startup ecosystem. What is your take on this phenomenon and how is Anicut Capital approaching it?
While there continues to be significant interest and confidence in India's startup ecosystem, we have become more strategic, selective and discerning in our investment decisions and are choosing companies with high growth potential, innovative solutions, and long-term business plans. We are also working closely with our portfolio companies to ensure they are well-positioned to weather economic uncertainties. While short-term challenges may exist, the focus remains on identifying businesses with the potential for sustained success over time.