Avendus to partner Zodius Capital for new fund to invest up to $500M in digital space

Financial services firm Avendus Capital, through its alternative asset management subsidiary, is partnering technology-focused private equity firm Zodius Capital, to invest $400-500 million in firms in the high growth digital and SMAC (Social, Mobile, Analytics and Cloud) based business services, as per a company statement.

Zodius Capital is promoted by Neeraj Bhargava, former CEO of business process outsourcing firm WNS, along with Gautam Patel and Shilpa Kulkarni. Bhargava, who co-founded WNS Global Services in 2002, led the BPO company for a US listing. He was also the first investor in Deep Kalra founded-MakeMyTrip, the first Indian internet company to have gone public in the US.

The joint investment fund would cover both internet and mobile domains, and areas such as media, commerce and consumer services. Business services investments would be focused primarily on SMAC driven IT/BPO opportunities to build new disrupters, or restructure and redirect existing companies toward new high growth market segments, the official statement said.

The fund christened Zodius Capital II is a follow-up to the previous fund Zodius Capital I, which focused on early-stage investments and build-outs in the technology sector. Its current portfolio companies include Group FMG, ZyFin, Antuit and Enki Professional (backed and helped develop the True School of Music).

Zodius Capital II will invest primarily in late-stage and pre-IPO companies with a differentiated investment strategy. It would have a shorter investment period of 1+1 years as investors will see pre-identified and cultivated deals and commit funds in three tranches to portfolios of $100-150 million each, making it unique amongst the typical blind pool (post fundraise) strategy followed by most growth funds. It would also have a different lifecycle and lock-in of 5+2 years against 10+2 years in conventional funds.

Zodius II will look to make investments of around $25-40 million across 15 companies.

"Both Avendus and Zodius have unparalleled track records, expertise and network to generate deal flow, develop companies and work with them to a planned exit either through an IPO or a strategic sale. Collectively we are well placed to explore the tremendous opportunity in India centric digital and SMAC businesses," says Neeraj Bhargava, founder and senior managing director of Zodius.

"The IPO surge for digital India centric businesses is just beginning and we expect it to create a very high growth environment in this sector," says Ranu Vohra, co-founder, MD and CEO of Avendus Capital.

Avendus is one of the top mid-market investment bankers in the country and also has a separate alternative asset management unit.

(Edited by Joby Puthuparampil Johnson)