www.acquisition-intl.com/2015-2016-fund-awards
Emerging Market Institutional Money Management Firm:
Venus Capital
Management Inc
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IF16040
Founded in 1994, Venus Capital Management, Inc. advises private funds
invested in a variety of asset classes, with a focus on India. We invited Vik
Mehrotra to furnish us with a unique insight into this dynamic firm and its
investment strategies.
Established in 1994, Venus Capital is an institutional focused India dedicated firm, based in Boston with affiliated offices in London and New Delhi. Its ability to generate alpha and control risks keeps Venus Capital at the
forefront of firms sourcing, developing, and executing risk-adjusted returns from India.
Venus focuses on direct lending to small and medium enterprises (SME’s) in India, and these are well collateralized loans with low loan to values and protections built in to ensure safe return of capital. Its clients include
corporate pension funds, family offices and sovereign funds based in the US and Europe.
Company: Venus Capital Management, Inc.
Name: Vik Mehrotra
Email: [email protected]
Web Address: www.venuscapital.com
Address: 99 Summer Street, Suite M100,
Boston, MA 02110
Telephone: +1-617-423-1901
The firm runs the Venus India Structured Finance Fund, which has invested through a tax efficient structure
through Mauritius into an operating company in India that gives loans to SME’s. It manages investments risks
by taking all decisions through a four member investment committee, which has to approve loans on a unanimous basis.
The biggest challenge Venus currently sees as a business is the appreciation of the USD against emerging
market currencies. Though, the Indian Rupee has fared better against GBP and the Euro, it has declined slightly
against the USD in last 12 months. The Indian Rupee has done relatively well compared with other emerging
market currencies. In the short term, it is a function of money flows into India but commodity deflation is helping
Indian currency as import bill has gone down. Venus occasionally hedges against the decline in Indian Rupee, if
macro fundamentals are looking bad and its models predict a slowdown of investment flows into the country.
However despite these challenges there are a number of opportunities inherent in working in this market. The
opportunity to be a shadow lender in India emerges from the fact that there is a tremendous need for growth
capital and commercial banks are restricted in many ways to fulfil that need. Banks are not nimble and flexible
enough to understand the needs of the small and medium enterprise borrower. After the credit crises of 2008,
they have mostly focused on the larger borrowers, leaving opportunities to work with smaller borrowers.
In order to successfully work in this market Venus believes that having strong local knowledge is the key. Despite the fact that Venus has a global presence, it also has the local intelligence to judge the credit worthiness
and intention of a borrower that matters the most. Venus has developed a strong network of relationships that
gets it the qualitative information on a borrower to take the right decision.
In addition to its collaborative approach, which ensures that Venus is always up to date with the latest local
information, it keeps ahead of emerging trends in the industry by operating customised technology to monitor
interest and principal payments. It has numerous databases and subscriptions to Bloomberg and so on for
collecting quantitative data. The key remains to collect qualitative data to know the intention of the borrower, in
order to stay ahead of the market.
However despite its strong investment in technology, for Venus lending is always about the behaviour of the
client, especially during trying circumstances and the intentions at the time of borrowing. No balance sheet
can tell any quantitative analyst the same. Hence, it has developed the network of people in the financial and
banking community, who get Venus this information to verify the credibility of the borrower.
Overall Venus feels, its approach to investing in India through direct lending is a prudent one. If one can make
private equity like returns of 17% with senior secured debt risk then there is no need to take private equity
risks. Venus’s typical loan to value is 33-40%, which highlights how risk averse its strategy is.
Looking ahead there are a number of areas into which Venus can grow, providing it with new opportunities. It
is evaluating entering the housing finance and purchase of non-performing assets business in India. Banks are
being told by central banker to clean up their balance sheets and both of these areas have good opportunities
which will keep Venus busy for the foreseeable future.
Venus’s chosen asset class offers the opportunity for competitive risk-adjusted returns with reduced volatility
in India. Eventually, the operating company has long-term plans for a public offering in India, giving equity
investors an exit, assuming favourable operating results, market conditions, and other contingencies, of course.
The investors, who want yield can take a redemption from the fund starting in two years.
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