ValueQuest Investment Advisors has been in a position to enable a major milestone through the closure of its private equity fund, ValueQuest Tristar, to ₹2,000 crore. This is a capital increase that is fully financed by domestic Limited Partners (LPs), which is an indicator of enthusiasm to explore the production capacity of the domestic markets of India.

The 100% rupee-denominated fund exceeded its initial aim of ₹1,500 crore by unlocking a greenshoe of ₹500 crore, indicating high levels of trust in the investment strategy of the firm by the high-net-worth individuals and family offices.

Investment and strategic focus

The Indian economy is experiencing a significant resurgence in the industrial sector, and the successful fundraising has come at this time. Using domestic capital, ValueQuest is also cementing its place as a prime financier of the new generation of Indian companies that are already past the initial phases of venture capital funding and are in need of institutional private equity funding to finance their next round of growth.

ValueQuest Tristar fund is specifically identified to focus on the high-growth and advanced manufacturing industries, such as aerospace, defence, and energy transition. ValueQuest is unlike other venture capital or private equity funds that are investing in software-as-a-service (SaaS) or consumer tech companies; it is making investments in businesses that involve physical investments in machinery, land, and working capital. The fund managers are convinced that capital naturally moves to areas where opportunity and profits are, and the manufacturing sector of India is facing such a point.

The investment team, headed by Aniket Dharamshi and Arvind Ananthanarayana, aims at companies that have already come out of the experimental phase. The fund is mandated to support between 8 and 12 companies with cheques of between ₹150 crore and ₹400 crore. ValueQuest will collaborate with companies that have a product-market fit, strong unit economics, and customer relationships. The fund will offer the scale-up capital that is required to expand infrastructure and operations by carefully shunning loss-making ideas.

Core thesis of the fund

One of the main theses of the fund is that the wider economic trend in India is evidently skewed towards manufacturing-driven growth. This is provided by the huge capital expenditure cycles that are currently being made by major Indian conglomerates like Reliance, Adani, JSW and Tata. ValueQuest thinks that India would require a colossal inflow of capital, perhaps between ₹2.5 lakh crore and ₹10 lakh crore, in the next 10 years to create the required manufacturing capacity to compete on the global scene.

The fund has already started investing its capital in strategic assets. It has supported Rangsons Aerospace, a precision manufacturing company with the highest-end domestic and international aerospace and defence customers. It has also invested in Waaree Energy Storage Solutions, which manufactures lithium-ion cells and battery packs that are used in international markets. These initial investments are in line with the goal of the fund to finance already tapping companies that are already listed in the public markets or are soon to be listed in the form of an initial public offering (IPO).

Conclusion

The ₹2000 crore fund raise of ValueQuest is a turning point in the history of domestic private equity in India, as it points to a shift to funding hard assets and key infrastructure. The Tristar fund has been offering the much-needed working capital, which is usually missing in the conventional VC strategies, by concentrating on industry-specific expertise in aerospace and energy.

The firm is poised to support Indian manufacturing firms to scale up to global competitors, as the firm is expected to finish its capital deployment in the next 18 to 24 months. The fact that this fund successfully closed is a legitimate measure of the sector-agnostic legacy of ValueQuest, but it also highlights the fact that domestic LPs are becoming mature enough to invest in long-term, capital-intensive industrial growth.