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Aavishkaar Launching $150M Africa Fund

January 3, 2017

Indian impact investment firm, Aavishkaar Venture Management Services (AVMS) is planning to launch a $150 million fund dedicated to investing in agriculture, fintech, energy, healthcare and education in Africa.

This will be Aavishkaar’s seventh fund overall and its second fund formed to invest in overseas markets. The firm is currently raising commitments for its $75 million Frontier Fund which will be focused on making investments in South and South East Asia.

Founded in 2001, Aavishkaar (which translates to ‘invention’ in Hindi) is focused on providing capital and support services to capable entrepreneurs in underserved sectors to foster development in low-income markets through the growth of sustainable enterprises according to the firm’s website.

Since its launch, Aavishkaar has grown to $155 million under management and has built a diverse portfolio of impact ventures across the agriculture, dairy, health, water, technology, education, microfinance, and financial inclusion sectors. Building on this success the firm is now looking to other emerging economies for growth. Over the next 10 years, the firm’s goal is to raise $1 billion to invest in 300 startups in low-income, emerging markets.

To date, the firm has made three investments beyond India’s borders totaling $4.5 million, and its agricultural investments so far include commitments to Osam DairyMilk Mantra; pomegranate and banana producer INI Farms Pvt; dairy automation company SKEPL; agricultural input supplier AgroStar; and fair-trade and pesticide-free cotton company Zameen.

AVMS is part of the Intellecap-Aavishkaar group, a collective founded by Intellecash, a provider of business capital to SMEs, Intellegrow, a venture debt provider, and microfinacer, Arohan.

Discussing the latest Africa fund, Vineet Rai, founder of the Intellecap-Aavishkaar group told Live Mint, “We are looking to raise between $100 million and $150 million for the African fund. We will start the fund-raising around the middle of 2017 and we expect to close it in 2018.”

The Africa fund is part of Intellecap-Aavishkaar’s initiative to lift its assets under management associated with debt and equity businesses to $3.5 billion by 2024. It will be making investments of between $500,000 and $5 million across west and east Africa with particular interest in Tanzania, Kenya, Ethiopia, Rwanda, Nigeria and Ghana.

“As a group, we had an AUM of $20 million in 2008. From that, we have grown to around $400 million in 2016. Over the next eight years, we plan to increase our AUM to $3.5 billion,” Rai told Live Mint. “Out of this, we are targeting around $1.5 billion through the various equity funds that Aavishkaar manages and will raise going ahead, while the remaining $2 billion will come from the various debt businesses—Intellecash, Intellegrow and Arohan.”

 

Impact Investment in India

The impact investment space in India that includes lead players such as Omnivore Partners, Lok Capital, Unitus Seed Fund, Caspian Investment Advisors, Accion, and Elevar Equity, has seen $4.1 billion in cumulative investments over the past six years according to McKinsey & Co., who goes on to state that impact investing in India has the potential to grow from $1 billion in investments in 2015 to between $6 and $8 billion by 2025, reports Reuters.

“India is one of the world’s biggest markets for impact investing, given the nation’s many pressing social needs and an abundance of global capital,” said Toshan Tanhane, senior partner at McKinsey. “Assuming a growth of 20 to 24 percent based on global rates and strong growth of underlying sectors, we estimate that India’s impact investing sector could absorb $6 to 8 billion of capital annually by 2025.”

Despite median returns of between 10 and 12 percent for approximately 50 exits, with the top deals delivering a 34 percent median internal rate of return, there are certain challenges that will need to be overcome by both the investment community and by the Indian government for the impact investment space to achieve this projected benchmark.

“The industry could benefit from professional certification programmes [sic], especially on the social side, and targeted support for social sector CEOs such as incubation, coaching and board advisory services,” stated McKinsey. “The sector needs to apply the same standards of diligence, post-diligence and portfolio monitoring as in traditional investing. This will require talent.”

 

-Lynda Kiernan

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