Alteria Capital makes first close of third venture debt fund at Rs 1,000 crore

Fund III’s size is expected to be Rs 2,000 crore and will close over the next two-three quarters.

The first close of Fund III comes exactly a year after it announced the final close of its second fund at Rs 1,820 crore.

“While there’s a demand for venture debt, we do not see the market doubling or tripling. It will still be linear growth, even as equity investments degrow this year,” said Vinod Murali, cofounder and managing partner, Alteria Capital in an interaction to ET.

“From a supply of capital perspective, we felt that our new 3A fund or the venture debt scheme A fund should be ideally at the same size as our previous fund. A couple of thousand crores is good from an exit perspective. If there’s more demand, then there will be a shorter duration between new funds,” Murali added.

Alteria has returned the total corpus of Rs 960 crore to investors from its first fund, he said.

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The venture fund has drawn down the total corpus from its second fund, investing it across startups. It continues to recycle the capital from the second fund.

“The time gap between Fund II and Fund III has been shorter. But venture debt is about discipline. So, the larger the fund size, you are also likely to get tempted to be undisciplined in a way,” Punit Shah, managing partner of Alteria Capital, told ET.

Alteria is looking to close 120-150 deals with Fund III, writing average cheque sizes of Rs 20 crore to Rs 22 crore, about the same as its previous fund.

It is thinking of drawing down the total corpus from Fund III in about eight quarters.

In terms of sectors, Alteria will continue to back startups across healthcare, consumer brands, as well as electric mobility, agritech and reg-tech.

Fund III comes at a time when equity investments in Indian startups have stalled, as global inflationary pressures and concerns over high interest rates have affected public markets, leading to a rout in global technology stocks.

“We started fundraising three months back and have closed Rs 1,000 crore. The reason why our LPs (limited partners) have confidence in us is because we (as fund managers) have seen various cycles of these ups and downs in India. And our LPs have also seen different roles that venture debt has played across different cycles,” said Ankit Agarwal, managing partner, Alteria Capital.

In the nine months ending September 30, total private equity (PE) and venture capital (VC) investments in Indian startups fell to $20.4 billion from $24.8 billion in the same period last year.

The third quarter of the calendar year – July to September – saw overall funding dip almost 77% to $2.7 billion from $11.9 billion year-on-year, according to data from research firm Venture Intelligence.

“In markets like these, one is able to access some really high-quality names because they are also afraid, and would require some capital as a buffer, in spite of cash in their banks. So, you get into disproportionately valuable situations,” added Murali.

Along with Fund III, Alteria is also closing a separate fund, dubbed “Scheme 3B”, which will have a target corpus of Rs 750 crore and a green shoe option of another Rs 750 crore, to provide working capital to startups.

Alteria has received the necessary approval from capital markets regulator, the Securities and Exchange Board of India (Sebi), for the separate fund.

“We wanted to just ensure that when founders are raising debt for working capital, they expect a slightly less expensive product. There were also certain pockets of investors interested in this offering and this separate fund will play out next year for us,” Murali said.

Founded in 2017, Alteria has backed over 100 portfolio companies including Cars24, Niyo, EarlySalary and Zepto.