Spokesperson: Anshu Kapoor, President and Head, Nuvama Asset Management Anshu Kapoor, Partner, Nuvama Group. In this feature he shares the venture fund’s vision to back high value start-ups who are “building from India for the world”, the close of its $129Mn cloud fund, top investment trends and the fund’s bullish approach towards investing in enterprise centric sectors in 2023.
Crossover IV Fund by Nuvama: Aiming for Rs 4,000 Crore with Strategic Middle Eastern Outreach
Anshu Kapoor
Delve into the strategic realm of growth equity with IVCA’s Private Equity Pulse. Today we speak to Anshu Kapoor, President and Head, Nuvama Asset Management. In this interview Anshu talks about Nuvama launching its latest Crossover IV fund, targeting Rs 4,000 crore with a strategic focus on wealthy individuals in the Middle East. Leveraging its 25+ years of India expertise and the backing of PAG, Nuvama aims to attract high-net-worth individuals, NRIs, and family offices in the GCC region. The fund will invest in companies preparing to go public, offering a unique buy private, sell public approach for superior risk-adjusted returns. This move marks Nuvama's first major venture into offshore markets, aligning with its goal to expand and diversify its investor base.
1. Nuvama Asset Management is targeting Rs 4,000 crore for its latest Nuvama Crossover IV fund, with a significant focus on tapping wealthy individuals in the Middle East. Can you elaborate on the strategy behind targeting this specific investor segment and how it aligns with Nuvama's overall investment approach?
Nuvama is a trusted brand amongst domestic investors with a legacy of India expertise built over the last 25+ years. With the backing of a renowned global name like PAG, Nuvama Asset Management has a clear focus on offering alternative solutions around asset classes such as private equity, public markets, and real assets. The Crossover Funds platform is the flagship offering under the private equity vertical, first launched in 2017. With a market-leading performance, the maiden series of this fund has returned the entire capital and gains to investors – one of the few in its vintage to do so. We have raised ~US$ 800 million across our all-Private Equity strategies till date.
As India’s Private Equity ecosystem evolves, we see a strong demand picking up across regions. We are excited to venture into the offshore markets starting with GCC as the first step. Along with the proximity, below are some of the factors that make GCC a key region for us:
a) Wealth Concentration:The Middle East, particularly countries like the United Arab Emirates, Saudi Arabia, and Qatar, boasts a significant concentration of high-net-worth individuals and ultra-high-net-worth individuals. Along with the Individual investors, GCC regions have few of the largest wealth funds and family offices which have been actively investing in India Private Equity over the last few years.
b) NRI Base:Over 60% of NRIs are based out of GCC countries. With deep ties to their homeland, this large Indian diaspora is keenly interested in participating in India's rising wealth generation opportunities.
c) Need for Geographical Diversification:The 4 key Ingredients of success: Deep pools of labour, Competitive Cost structures, Capabilities across industries and growing exports make India a premier destination in the backdrop of China Plus One policy.
d) Strategic Partnerships:Establishing relationships with wealthy individuals in the Middle East can go beyond mere capital infusion. It can lead to strategic partnerships, co-investment opportunities, and access to valuable networks and resources within the region. These partnerships can enhance deal sourcing, due diligence capabilities, and post-investment value creation initiatives, ultimately contributing to the success of the Nuvama Asset Management franchise.
e) Alignment with Investment Approach:Nuvama's investment approach emphasizes on investing in high-potential companies positioned for significant growth and value creation. Such companies are often found in sectors undergoing rapid technological innovation, disruption, or transformation, areas where Middle Eastern investors see substantial upside potential. With an alignment of investment preferences and risk appetite of individuals/Institutions in the region, a focus on this region enables Nuvama to attract capital from investors who share its vision and strategic objectives.
2. Could you provide insights into the investment thesis of Nuvama Crossover IV fund, which focuses on investing in companies preparing to go public on Indian stock exchanges? How does Nuvama identify and evaluate potential investment opportunities within this space?
Nuvama Crossover Fund partners with companies in a crucial phase of the company – the crossover phase. In the crossover phase, the company “crosses over” from the being a Privately held company to a publicly listed enterprise. This is a pivotal phase for all the key stakeholders of the company – For the Promotors/parent, for previous PE investors, for the company.
The “buy Private - sell Public” is a proven approach that offers a better risk adjusted returns profile. We are looking for companies with an intent and a plan to go public in ~2-3 years from our investment date. These evolved enterprises have proven business economics and an ability to continue high growth for the long term. Demonstrated track record and an established, meaningful scale results in a significantly lower mortality rate. This “Crossover” style of investing is one of the best strategies for PE investing as it offers a superior risk-reward profile.
Our sector agnostic investment framework has been meticulously crafted and perfected through years of hands-on experience by an able Fund management team. The value investment framework is based on 3 pillars –
a) Thematic bias:Growing sectors driven by structural Indian underpenetrated consumer growth. Large market potential, Visible room for structural growth over at least 5+ years.
b) Leadership bias:Capabilities as a market leader or path to leadership, Higher growth than industry (increasing market share).
c) Fundamental bias:Higher growth in revenues and profitability compared to peers and industry, Proven unit economics with a capital efficient business model, Low or no leverage and low susceptibility to market shocks.
3. Nuvama also plans to raise capital for a new public equities long-short product. What are the key objectives and strategies of this product?
Nuvama Asset Management’s public equities arm is built around offering alternative solutions designed to tap into opportunities presented by India’s vibrant public markets. EDGE (Enhanced Dynamic Growth Equity) Fund is the Long-short strategy that is an alternative for large cap equity. The objective of this strategy is to deliver returns while lowering the portfolio volatility. EDGE fund is a category leader in India in terms of performance.
4. The decision to register both funds in Gujarat International Finance Tec-City (GIFT City) reflects a strategic move. Could you discuss the advantages of operating from GIFT City and how it enhances Nuvama's capabilities in fund management and investor relations?
GIFT IFSC is built with the idea of being India’s gateway to inbound and outbound investments.
All three routes of investments in India – FDI, FPI and FVCI are available to IFSC entities. This flexibility under the foreign exchange regulations complements AIF regulations well, making IFSC attractive for a wide range of funds.
Parity with international jurisdictions, favorable taxation regime, calibrated regulatory regime are among the key factors that have led to gaining international investor’s trust as the preferred investment route
5. Anshu Kapoor mentioned expectations for Nuvama's assets under management to grow significantly in the next 12 to 18 months. What factors are driving this projected growth, and what are the key initiatives Nuvama is undertaking to achieve its growth targets?
Nuvama Asset Management manages ~US$ 1 billion of assets under various strategies. As we build a strong track record and distribution strength, we expect the assets under management to expand significantly in the next 4-6 quarters. Some of the key factors and initiatives driving this growth are:
a) Distribution network:With the differentiated market leading offerings, we have been able to partner with ~20 prominent partners across the banking and wealth management space. This has added on to our capability to scale up existing products as we add more strategies.
b) Announcement of JV:As we see the potential in an emerging asset class – Commercial Real Estate, we have formed a 50:50 JV with Cushman & Wakefield to create a fund that is designed to invest in India’s rising office spaces market.
c) Geographical expansion:As we venture into the offshore markets starting with the GCC market, we expect to get foreign investors for the first time. This will open doors to large pools of offshore capital, propelling the AUM numbers for us.
d)GIFT US$ India offering:We have mirrored the India strategies into their USD versions as we list our two flagship funds on the GIFT IFSC platform. This will enable us to effectively tap the NRI investor base on a large scale.
6. Nuvama emphasizes a client-centric approach, prioritizing the understanding of client dreams and aspirations. How does Nuvama integrate this philosophy into its investment strategies and client relationships?
Nuvama Group has Assets under Advice (AUA) of ~US$ 40 billion across a million+ clients. At Nuvama, the client-centric approach is not just a slogan; it's ingrained in every aspect of our operations. Nuvama ecosystem offers an unmatched proximity to investors across categories. It helps us with deep insights around our clients’ needs and aspirations.
At Nuvama Asset Management, our strategies are crafted with a focus on addressing the unmet needs of our clients. Our client relationships are built on trust, transparency, and ongoing communication.
7. Technology plays a crucial role in Nuvama's operations, with a focus on technology-driven platforms that adapt to investment trends. Can you elaborate on the specific technologies or platforms utilized by Nuvama and how they contribute to delivering value to clients?
Nuvama Asset Management takes pride in being the first asset manager to deliver a comprehensive digital experience from start to finish to our clients and partners. Our digital platform “Swift” makes it convenient for a Relationship manager to digitally complete the full application process. The portal is designed to improve communication efficiency with options to download account statements, FAQs etc on the go. We leverage the UIDAI’s Aadhar linked verification framework for an easy OTP based application, without any need for wet signatures.
With our Whatsapp Chat bot, the Nuvama Asset Management suite is at the client’s fingertips. We continue to invest in technology to try and implement the best digital practices and platforms to ensure convenience, safety and adherence to regulatory frameworks.
8. With a diverse client base ranging from mass affluent to institutional investors, how does Nuvama ensure personalized and tailored solutions for each client segment while maintaining consistency in service quality?
Nuvama ecosystem serves 1.2 million clients via Nuvama Wealth, 3600+ ultra-high net worth families via Nuvama Private and India’s top DFIs, institutions via the institutional clients group. Apart from the internal Nuvama Distribution channels, the asset management business also has ~20 large external counterparties including India’s largest banks and wealth outfits.
The risk appetite, understanding levels and expectations differ significantly across the clientele.
For mass affluent clients, we prioritize accessibility and simplicity in our services, providing user-friendly platforms and personalized support. This might include offering simplified investment options and educational resources to empower clients in making informed decisions.
Conversely, for institutional investors, we focus on sophisticated strategies and an unmatched access to superior investment capabilities built over the years. This could involve implementing complex investment strategies and providing detailed performance reporting to meet institutional standards.
Despite these tailored approaches, Nuvama maintains consistency in service quality by adhering to rigorous internal standards and processes. We ensure that all clients receive the same level of professionalism, responsiveness, and attention to detail, regardless of their segment. Our dedicated client service teams are trained to uphold these standards and provide exceptional support across the board.
9. The management team at Nuvama comprises industry stalwarts with deep experience and expertise. How does the collective experience of the team influence Nuvama's investment decisions and client servicing practices?
With seasoned industry veterans leading the way, Nuvama's management team brings a wealth of experience and expertise to the table. This collective knowledge profoundly influences both our investment decisions and client servicing practices.
The advantages of the Nuvama Ecosystem become evident as the investment teams gain insights into the markets from various business leaders, each offering unique perspectives on their respective domains.
The investment committees have cross division representations for a holistic view improving the risk assessment and decision-making abilities.
10. Looking ahead, what are Nuvama's strategic priorities and goals for the future? Are there any new initiatives or market segments the firm is exploring to further enhance its offerings and capabilities?
At Nuvama Asset Management, our priorities are multifaceted, centered on establishing a high-quality, scalable franchise aimed at effectively addressing our clients unmet needs. Some of the key priorities are:
a) Significantly scale the franchise.
b) Build a full suite of alternatives:Among the ongoing public markets, private markets and real assets; we plan to add credit products.
c) Continue to scale public markets offerings:Across product types and geographies.
d) Expand distributionNuvama Internal Channels, Domestic: Wealth managers, Banks and Institutions, International: Institutions and NRIs
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