Big Basket-, Pharmeasy-backer Trifecta books best year with Rs 1,500-cr deployment in FY23; achieves Rs 5k-cr cumulative investments
Arijit Sarkar, Director, Trifecta Capital said the renewed focus on profitability over growth has made debt an ideal source of capital for many start-ups
- May 18, 2023,
- Updated May 18, 2023 2:32 PM IST
Venture debt provider Trifecta Capital has had its best operating year in FY23 when it deployed a record Rs 1,500 crore even as start-up funding has been sliding backwards. The company has invested Rs 800 crore in the second half of FY23 when the funding slowdown intensified. Cumulatively, the Gurgaon-based company has invested nearly Rs 5,000 crore across its three venture debt funds across 150 start-ups.
More than Rs 6,000 crore was invested in Indian companies through venture debt in 2022, of which Trifecta accounted about 20 per cent share by value. Trifect witnessed over 40 per cent growth year-on-year, leading to its highest deployment in any single financial year.
The company made 27 investments in the second half of FY23 in startups including Cogoport, Practo, Entropik, Rebel Foods, Udaan, Stashfin, Cashfree, Koo, BiryaniByKilo, Ripplr, Wiz Freight, Rooter and Log9.
Arijit Sarkar, Director, Trifecta Capital said the renewed focus on profitability over growth has made debt an ideal source of capital for many start-ups.
“Companies are forced to become more prudent with their capital. They stop spending very aggressively, cut down on costs, manage their marketing and people cost better. And that actually makes the business more ready for debt. If they are not making heavy losses, they have some predictability in business. That’s the main reason why we are seeing the growth in debt,” he said.
As per a PwC report, overall VC funding in India declined about 33 per cent to $24 billion in 2022, compared to $35 billion in 2021.
As per Sarkar, about 10-20 per cent of the Rs 15,000 crore it deployed in FY23 was into start-ups that deferred their funding plans due to unacceptable valuations.
“When equity is hard to come by and the valuation is not attractive to the founders, they decide to take some debt and wait out to see what the markets looks like in 12 months. Most of the opportunities we are seeing are from businesses which have already gone through the journey of cutting down costs,” he said.
Sarkar said Trifecta’s deal structures have not changed much despite interest rates growing significantly globally.
Venture debt financing is generally structured to yield 13-20 per cent interest rates with a 3-4-year repayment periods. Almost all providers structure an equity upside in the form of warrants which is normally about 8-12 per cent of the debt.
“Our funds are usually around 7-9 horizons. In those funds, we invest at least twice or thrice for 3 year deals. Once we invest, the rates are locked in for the 3 year horizon. We have seen some upward movement in interest rates, but we also see some downward pressure because there is more supply of capital. Both HNIs and institutions are seeing that this asset class is giving better returns than traditional debt models and the risk is quite manageable. These two factors cancel each other out in our space,” he said.
Trifecta’s interest rates range between 14-12, depending on the risk profile of the start-up and structure of the deal, and it has remained same for the last 2-3 years, he said.
“Generally, we don’t do 20+ (interest rate) deals. Those fall more into distress or structured debt. Those are not the kind of risks we take. Interest rates could move on to the higher end of our range in some of the repeat investments where the company is also open to the idea that interest rates have gone up and so the debts should be repriced. But in companies which are big and become mature where there cost of capital has moved down substantially, we do the same rates,” he added.
Abhijit Joshi, Associate Director at Trifecta, said the company has a pipeline of near-term opportunities worth over Rs 500 crore, and targets to invest Rs 1,600 crores in FY24. The funds expect to cross Rs 6,000 crore of debt capital investments during the financial year 2024 itself.
“Start-ups are tapping debt very actively. Our outlook looks quite positive. In the coming year, we expect to do Rs 400 crore a quarter and Rs 1600 a year. While FY23 was our biggest so far, I’m sure FY24 will be bigger. We may end up doing 15-20 per cent more than last year,” he said.
Trifecta’s portfolio includes 21 unicorns and more than 12 soonicorns, with marquee businesses including Big Basket, Pharmeasy, Cars24, Vedantu, The Good Glamm group, Infra.Market, ShareChat, Dailyhunt, UrbanCompany, CarDekho, Blackbuck, Udaan, Rebel Foods, Slice, Ninjacart, NoBroker, Dehaat, Turtlemint, Servify, Livspace and Fashinza amongst several others. The company’s portfolio has cumulatively raised $13.5 billion of equity and is cumulatively valued at $67 billion.
Venture debt provider Trifecta Capital has had its best operating year in FY23 when it deployed a record Rs 1,500 crore even as start-up funding has been sliding backwards. The company has invested Rs 800 crore in the second half of FY23 when the funding slowdown intensified. Cumulatively, the Gurgaon-based company has invested nearly Rs 5,000 crore across its three venture debt funds across 150 start-ups.
More than Rs 6,000 crore was invested in Indian companies through venture debt in 2022, of which Trifecta accounted about 20 per cent share by value. Trifect witnessed over 40 per cent growth year-on-year, leading to its highest deployment in any single financial year.
The company made 27 investments in the second half of FY23 in startups including Cogoport, Practo, Entropik, Rebel Foods, Udaan, Stashfin, Cashfree, Koo, BiryaniByKilo, Ripplr, Wiz Freight, Rooter and Log9.
Arijit Sarkar, Director, Trifecta Capital said the renewed focus on profitability over growth has made debt an ideal source of capital for many start-ups.
“Companies are forced to become more prudent with their capital. They stop spending very aggressively, cut down on costs, manage their marketing and people cost better. And that actually makes the business more ready for debt. If they are not making heavy losses, they have some predictability in business. That’s the main reason why we are seeing the growth in debt,” he said.
As per a PwC report, overall VC funding in India declined about 33 per cent to $24 billion in 2022, compared to $35 billion in 2021.
As per Sarkar, about 10-20 per cent of the Rs 15,000 crore it deployed in FY23 was into start-ups that deferred their funding plans due to unacceptable valuations.
“When equity is hard to come by and the valuation is not attractive to the founders, they decide to take some debt and wait out to see what the markets looks like in 12 months. Most of the opportunities we are seeing are from businesses which have already gone through the journey of cutting down costs,” he said.
Sarkar said Trifecta’s deal structures have not changed much despite interest rates growing significantly globally.
Venture debt financing is generally structured to yield 13-20 per cent interest rates with a 3-4-year repayment periods. Almost all providers structure an equity upside in the form of warrants which is normally about 8-12 per cent of the debt.
“Our funds are usually around 7-9 horizons. In those funds, we invest at least twice or thrice for 3 year deals. Once we invest, the rates are locked in for the 3 year horizon. We have seen some upward movement in interest rates, but we also see some downward pressure because there is more supply of capital. Both HNIs and institutions are seeing that this asset class is giving better returns than traditional debt models and the risk is quite manageable. These two factors cancel each other out in our space,” he said.
Trifecta’s interest rates range between 14-12, depending on the risk profile of the start-up and structure of the deal, and it has remained same for the last 2-3 years, he said.
“Generally, we don’t do 20+ (interest rate) deals. Those fall more into distress or structured debt. Those are not the kind of risks we take. Interest rates could move on to the higher end of our range in some of the repeat investments where the company is also open to the idea that interest rates have gone up and so the debts should be repriced. But in companies which are big and become mature where there cost of capital has moved down substantially, we do the same rates,” he added.
Abhijit Joshi, Associate Director at Trifecta, said the company has a pipeline of near-term opportunities worth over Rs 500 crore, and targets to invest Rs 1,600 crores in FY24. The funds expect to cross Rs 6,000 crore of debt capital investments during the financial year 2024 itself.
“Start-ups are tapping debt very actively. Our outlook looks quite positive. In the coming year, we expect to do Rs 400 crore a quarter and Rs 1600 a year. While FY23 was our biggest so far, I’m sure FY24 will be bigger. We may end up doing 15-20 per cent more than last year,” he said.
Trifecta’s portfolio includes 21 unicorns and more than 12 soonicorns, with marquee businesses including Big Basket, Pharmeasy, Cars24, Vedantu, The Good Glamm group, Infra.Market, ShareChat, Dailyhunt, UrbanCompany, CarDekho, Blackbuck, Udaan, Rebel Foods, Slice, Ninjacart, NoBroker, Dehaat, Turtlemint, Servify, Livspace and Fashinza amongst several others. The company’s portfolio has cumulatively raised $13.5 billion of equity and is cumulatively valued at $67 billion.