The third version of the Future Leaders Fund (FLF), a late-stage investment vehicle targeted at high-growth Indian entrepreneurs, has been launched, according to eminent Indian financial services company Avendus. Dubbed “FLF III,” the new fund aims to raise ₹3,000 crore (about $350 million) and has the possibility to grow up to ₹1,500 crore ($175 million) through a greenshoe option. This would allow it to raise a whopping ₹4,500 crore ($525 million) in total.

FLF III: Targeting Market Leaders Across Key Sectors

A category II alternative investment fund (AIF) with SEBI registration, FLF III is intended to make strategic investments in 10–12 late-stage firms in a range of high-potential industries. With an average ticket size of ₹200-300 crore ($25-35 million) each investment, Avendus seeks to support companies that exhibit distinct market leadership and have the qualities that set category leaders apart. Financial services, consumer products, digital technology, healthcare, and manufacturing are the industries that FLF III is targeting.

Investment Strategy: A Blend of Primary and Secondary Transactions

FLF III’s investing strategy makes use of both primary and secondary transactions. This enables Avendus to take part in secondary transactions involving existing shares held by institutional investors in addition to making direct investments in potential businesses looking for additional funding for expansion plans. Companies that have “disaggregated institutional investor shareholding,” or a diversified ownership structure that may support future liquidity events, are sought after by Avendus.

Prioritizing Businesses with Strong Fundamentals

Companies with strong competitive advantages and a track record of performance throughout market cycles are given priority in the FLF III selection criteria. When assessing possible investment targets, Avendus highlights a dominant market position and solid operating performance as critical indications.

Investor-Centric Approach and Experienced Fund Management

With FLF III, Avendus demonstrates its dedication to an investor-first strategy. The fund’s top priorities are to provide investors with regular payments and steady returns with less volatility in the portfolio. Compared to other typical private equity funds, FLF III is anticipated to have a shorter investment horizon, providing investors with a quicker route to liquidity. Avendus also upholds strict governance guidelines to guarantee openness and prudent fund administration.

Along with his seasoned group, Avendus FLF managing partner Ritesh Chandra will continue to lead the new fund. Regarding Avendus, Chandra highlights the company’s dedication to supporting “differentiated, high-quality businesses with sustainable competitive moats and a clear roadmap to liquidity.” He draws attention to the FLF platform’s emphasis on providing investors with predictable and consistent results while upholding best-in-class governance procedures.

Leveraging Deep Market Knowledge for Differentiated Opportunities

Avendus’s broad network and in-depth knowledge of the Indian startup scene would be crucial in helping FLF III find lucrative investment possibilities. The fund plans to use a variety of exit strategies, including as public market listings and secondary exits, to give investors frequent access to liquidity.

Building on a Successful Track Record

The Avendus Future Leaders Fund was founded in 2019 and has a track record of making profitable investments in Indian entrepreneurs that are in their late stages. In collaboration with other private equity firms, FLF targets businesses that have substantial room for expansion. The FLF platform has a wide range of investors, including family offices from the United States and India, as well as domestic institutions and high net worth individuals (HNIs).

Through its two prior funds, Avendus FLF managed a corpus of ₹1,850 crore as of May 2024. Leading Indian startups like Lenskart (online retailer of eyewear), Delhivery (logistics and supply chain solutions), VerSe Innovation (owner of the news aggregator platform Dailyhunt), Licious (fresh meat delivery service), Juspay (payments solutions provider), Zeta (fintech company), and FirstCry (online baby products) are among the investments in this impressive portfolio.

Avendus’ Active Deployment Strategy

When it comes to allocating its investment resources, Avendus has shown initiative, especially in view of dwindling worries about a possible financial winter in the Indian startup scene. Avanse Financial Services is a prominent non-banking financial business (NBFC) in India, and Avendus FLF allegedly spent ₹1,100 crore in it just two months before FLF III launched. A further ₹140 crore in debt was then injected into GlobalBees, a rapidly expanding e-commerce rollup business.

Surge in Indian PE/VC Activity

The introduction of FLF III is indicative of a larger trend of growing engagement in the Indian venture capital (VC) and private equity (PE) markets. Domestic VC and PE companies raised more than $5 billion from limited partners (LPs) in 2023.

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Saiba Verma, an accomplished editor with a focus on finance and market trends, contributes to Atom News with a dedication to providing insightful and accurate business news. Saiba Verma analytical approach adds depth to our coverage, keeping our audience well-informed.