O3 Capital to raise $300 million for lending foray

Mumbai: Boutique investment bank O3 Capital is set to raise $300 million and use the proceeds to enter the lending business, focusing on Indian mid-market companies.

The investment bank has been in discussions with sovereign funds and family offices in the US and Europe, according to a senior executive. The fund will see participation from domestic backers and family offices.

To head the lending business, Tashwinder Singh, former director of KKR India, has joined O3 Capital as MD & CEO, credit strategies.

O3 Capital, which already has an NBFC licence, will run the credit business under the NBFC arm. The $300-million credit fund will lend about Rs 100-200 crore each, and the fundraising is expected to be completed before March 2020.

“As O3 Capital is an active midmarket investment bank, it has access to a lot of good quality mid-market companies. Also, mid-market is an area where companies struggle to get capital,” said Tashwinder Singh. “There’s a lot of interest for India from global investors. Although there is a liquidity crisis, fundamentally the economy is growing, and we believe that this is the right time to start the lending business in India.”

As a Citigroup veteran and former managing director, Singh was the business head, commercial banking, before moving on to lead Citi’s private bank in India. He worked in Citi for 18 years and 7 years at KKR India before joining O3.

Besides the investment banking business, O3 Capital is running portfolio management services (PMS) and owns a venture capital fund — Uniqorn Ventures.

Founded in 2015, Uniqorn Ventures is the early-stage investing arm of O3 Capital. The fund invests in tech companies in sectors such as online retail, fintech, healthtech, and foodtech. Notable investments include VelvetCase, Chillr, Docplexus, Bewakoof, and TongueStun. The firm has $45 million invested currently.

O3 Capital is also an independent sponsor and has invested about $85m in firms such as Bazaar Kolkata.

Founded in 2007 by Shyam Shenthar, Deepesh Garg, Shiraz Bugwadia and Srinivas Tekal, O3 Capital entered the asset management business in 2016. It has offices in Mumbai and Bengaluru.

After witnessing healthy growth over the past few years, non-bank credit growth slowed down in the second half of fiscal 2019 due to tight liquidity conditions, said a recent Crisil report.

Consequently, NBFCs that were gaining market share from banks across major asset classes in the past could not do so in FY19, it added.