Rahul Khanna, Managing Partner at Trifecta Capital

VCorporate debt firm Trifecta Capital raised Rs 750 crore and marked the first close of its third debt fund. Trifecta received its approval from the market regulator in August. It aims to increase Rs 1,000 crore and offers a green shoe option of Rs 500 crore. According to the fund’s senior executive, they are on track to raise the entire fund by the first quarter of CY2022. (The Green shoe option means the fund can raise additional capital if needed, but not more than this amount)

“We have estimated that Rs 750 crore is significant capital for the first closing. We have raised this capital from our existing investors and are on track to close it soon, ”said Rahul Khanna, Managing Partner at Trifecta Capital.
Trifecta raised this capital from insurance companies, financial institutions and large family offices in the country. It provides for the definitive closure of international institutional participation for both its debt fund and its equity fund.
Trifecta started as a pure risk debt fund in 2015 by Nilesk Kothari and Rahul Khanna and they had managed to raise Rs 500 crore as part of their first fund. In 2018, the company raised its second fund of Rs 1,000 crore. Last year, the company expanded its services, launched its first growth-stage equity fund and raised Rs 1,300 crore under the same amount. He is looking to raise Rs 1,500 crore for the equity fund. He hired Lavanya Ashok, previously Managing Director of Goldman Sachs Private Equity in India, to manage the equity portfolio.
Khanna now believes they’ve gone from being a simple VC debt provider to a platform that engages with startups on their journey, something more on the lines of House of Trifecta.
“We are now more of a platform, have established a balance sheet and have been able to go back to our same Limited Partners (LPs) to raise capital. The interesting thing about our capital raising is that we generally don’t use investment firms to raise capital. And even today, somewhere between 75 and 80 percent of all the capital that we have raised, has come through direct contact with LPs (limited partner). I think it builds very deep and sticky relationships over cycles, ”Khanna adds.

One thing that has worked for the fund is the fact that it has been able to generate returns for its investors. According to Khanna, the fund is on track to generate a net internal rate of return (IRR) of around 17%; from his second fund, he should generate an average net IRR of 20%. As for the new fund, he has advised investors that return expectations will be in the range of 16-18%.

Khanna says, “Since we launched our first fund, we have almost 85 companies in our portfolio, of which 15 are unicorns and 12 are valued between $ 500 million and $ 1 billion. It is not luck, but our disciplined approach to investing. From his second fund, he invested in BigBasket, Infra.Market, MyGlamm, Dailyhunt among others.
India’s private equity and venture capital ecosystem has deployed a record $ 49 billion in Indian companies, most of which has been invested in modern technology companies. The size of checks for Series A investments has also seen a big increase, which means more funds are now on their way to raising capital.
This is also the case with venture capital debt, although Khanna is quick to point out that they deploy 20-30 crore rupees in early deals, “to start a relationship” with the founder with a coupon from 14 to 15%, then they follow one another in the following rounds. He can technically allocate 10 percent of the fund to a single company if needed.
As the market evolves and startups grow into larger companies, their capital needs have also undergone a significant change. In early 2015, the founders would further increase venture capital debt as leeway to raise their next round of capital, but debt is now structured in different ways, ranging from a basic working capital loan to financing. acquisitions, etc.

Khanna explains, “We see significant room for improvement in debt growth as a business. Some of them use their balance sheets for consolidation and acquisition. As companies grow, their capacity to absorb capital also increases, the use cases regarding financing, working capital, inventory holding, financing acquisitions become more and more important. And we’ve been thinking strategically about the types of investors we want to have in the fund because at the scale that these companies (startups) want to raise capital, we should be able to do it from our balance sheets or get commitments from these. investors. ”

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