Forbes India 15th Anniversary Special

Avendus Capital: Mavens of the mid market

Having climbed out of early pitfalls, it has grown to have a finger in every lucrative sector

Sayan Chakraborty
Published: Jul 4, 2018 12:28:52 PM IST
Updated: Jul 6, 2018 09:18:08 AM IST

Avendus Capital: Mavens of the mid marketAvendus Capital co-founders Kaushal Aggarwal (left), Ranu Vohra (centre) and Gaurav Deepak. The trio is now moulding the firm into a financial services outfit
Image: Aditi Tailang

It was a nippy September morning in 2004, when Ranu Vohra, on his way to the San Francisco airport to catch a flight home to Mumbai, broke into a cold sweat. It wasn’t how the investment banker had foreseen his day, and a call from Neeraj Gupta, CEO at Cymbal Corporation, left him baffled.

Vohra had parked himself at Cymbal’s headquarter at Fremont, California, for the previous three weeks, firming up the final contours of the company’s sale to Patni Computer Systems in India. By the time he finished work the previous evening, all the creases had been ironed out, or so he thought. It was a matter of time before the deal was inked and Avendus Capital, an investment bank Vohra, 46, had launched with Kaushal Aggarwal, 44, and Gaurav Deepak, 43, four years ago, would walk home with a generous fee.

The reverie was short-lived. On that call, Gupta told Vohra that the dynamics had changed, overnight. Patni now wanted 90 percent of Cymbal’s workforce to stay on after the acquisition, which the Cymbal management deemed a tough ask. “Instead of taking a peaceful flight home, I travelled with a question mark on my mind,” remembers Vohra of Avendus Capital’s big break, now sitting in the firm’s 6th-floor office at Mumbai’s Bandra-Kurla Complex.

The deal, which was brewing for six months, was crucial for Avendus.

In the 1990s, internet startups in the US had triggered a gold rush among venture capital (VC) firms. The dotcom bubble was growing bigger. In India, early birds such as MakeMyTrip, Contests2win, Indiaplaza and Firstandsecond had shown promise. Meanwhile, an Indian entrepreneur, Ashok Jain, sold his company IndiaWorld Communications Pvt Ltd to Satyam Infoway in 1999 for a whopping $125 million.

Vohra, Aggarwal and Gaurav, investment bankers with Communications Equity Associates, Kotak Mahindra and ICICI Bank respectively, were convinced that the startup wave would hit the Indian shores soon.

The trio launched Cool Startups, an online startup advisory firm modelled on in the US, in January 2000, from a small office in Khar, Mumbai, after snaring about ₹2 crore in funding, led by Infinity Ventures.

“Here were three IITans [Vohra and Aggarwal were from IIT-Delhi, Gaurav from IIT-Kanpur] starting something. I think the money came because of that, our relationships and backgrounds. I don’t think there was anything extremely attractive about what we were doing,” admits Vohra. “The idea was to take it to a certain level and may be sell it to or somebody else. It was crafted and planned to build and sell,” adds Aggarwal.

What they had not anticipated was that the bubble would burst so soon. It did, in March, leaving Cool Startups with little choice but to change tracks. In September, they morphed Cool Startups into Avendus Capital, an investment bank to advise software exporters and business process outsourcing companies.

Not that the pivot immediately helped. The firm was barely a blip on India’s investment banking radar dominated by homegrown giants such as Uday Kotak’s eponymous firm, Hemendra Kothari-led DSP Financial Consultants and Nimesh Kampani’s JM Financial. Then there were global heavyweights, such as Citi, Morgan Stanley, and Deutsche Bank. Until 2004, Avendus could muster only eight deals, the largest being worth $4 million.

The Cymbal deal, at $68 million, would not only shine a light on the firm’s ability to punch above its weight, but would also bring a financial breather.

Vohra eventually coerced Cymbal and Patni to make peace, although he does not disclose the final contours of the deal. “This deal gave us about two years’ runway. It was like light at the end of the tunnel,” he says.

On October 12, the day the deal was announced, the team at Avendus treated themselves to the first of many bottles of champagne they would pop in the years to come.


Over the next decade and a half, Avendus, which straddles sectors as diverse as digital, enterprise technology and services, consumer, financial services, health care, infrastructure and industrials, has evolved into a prolific mid-tier investment bank. The count stands at 138 mergers and acquisitions, with a cumulative deal value of $7.7 billion, and 164 private equity deals to the tune of $5.7 billion. Its offices in New York and London run global mandates in IT and BPO.

Some of its homegrown and global peers, with a finger on both private placements and capitals markets, have bigger numbers to boast. Avendus doesn’t deal in capital markets. Then, the firm is devoted to a different cause: Mid-market companies, which is a relatively uncontested sector, with smaller deal values and fees that don’t excite the bigwigs.

“We found that there was a big white space here. The mid-market companies of today could be the large-caps of tomorrow. The entrepreneurs needed advice, and there weren’t enough players offering quality advice. It presented an opportunity where we could deal with multiple clients rather than be dependent on industries where there were few participants, for example oil and gas, or banking,” says Vohra.

Kanwaljit Singh, managing partner at Fireside Ventures, says Avendus is good at spotting trends.

So, when VC firms started queuing up for Indian startups at the turn of the decade, Vohra, Aggarwal and Gaurav were among the first to spring into action, while some of the bigger names sat on the fence, watching.

“They started doing digital when it was not glamorous. They built relationships when it was hard to build relationships. And they have delivered. So, for a company, Avendus picking up a mandate is also a vote of confidence,” says Vinod Murali, managing partner at Alteria Capital.

Since 2011, the firm’s digital, media and technology vertical has cracked 59 fund raises and 11 mergers and acquisitions, worth about $3 billion. Among its clients are Quikr, Swiggy, Byju’s, BookMyShow, Firstcry and Lenskart. It is also credited with introducing investors such as Stripes Group, Valiant, Adveq, Chan Zuckerberg Initiative, TPG, Falcon Edge, Toutiao and Kinnevik to Indian startups.

“Buyers or sellers expect two things from investment banks—optimum value realisation and an assurance that the deal will succeed. Avendus has a closure rate of 70 percent, which is the highest in the country. We believe in adding value to the relationship,” says Gaurav.

Pranay Chulet, CEO of Quikr, agrees. “The thing that stands out about Avendus is its culture. It is more like a partner; things can go up or down, but it invests in relationships, keeping the best for its clients in mind. It has a practical world view. What matters in some of these transactions is speed, and it brings exactly that to the table.”


Today, the business spawns investment banking, wealth management, lending, and alternative asset management. A $250-million private equity fund under the Zodius Capital brand, which Avendus bought last November, is also in the works.

This firm is on course to close the current fiscal with “profits (before tax) in excess of ₹150 crore and revenues in excess of ₹500 crore.”

Avendus Capital: Mavens of the mid market
“We do not take status quo for an answer. Else, we won’t be relevant,” says Vohra. While the investment banking business is comfortably placed, the founders of Avendus are moulding the firm into a financial services outfit, an ambition they have harboured for about a decade.

“This is an endurance business and not a sprint. In financial services, it takes a long time to build trust and create a brand but once you do, it can be an interesting business,” adds Aggarwal.

Avendus first tried its hand at capital markets and brokerage in 2008, in the midst of the global financial downturn. It had raised $25 million in July, a couple of weeks before Lehmann Brothers filed for bankruptcy. Much of the capital was channelled into the new vertical, but, the needle didn’t move much, and it was sold to ILFS in 2011. “We entered the business with the right interest and intent, but, completely underestimated the kind of capital and resources that would be required to build it,” says Vohra.

Money is no longer a constraint. Between November 2015 and November 2017, Avendus raised $300 million from private equity firms Kohlberg Kravis Roberts and Co (KKR) and Gaja Capital. Avendus is now training its guns on the segment it knows the best—mid-market companies and their promoters—as it recasts itself into a source of capital, from a fee-based model. “It is basically wrapping its arms around the ecosystem,” says Murali.

But, is the firm stretching itself too thin? “Avendus is a 20-year-old business. Look at the large financial services players who started from similar positions,” says Gopal Jain, managing partner at Gaja Capital. “Edelweiss was a corporate finance outfit, Motilal Oswal was a boutique broker. They didn’t take 20 years to start a wider financial services platform. The founders of Avendus waited for the right time. In India, banking and financial services is witnessing a telecom moment. Its positioning around the emerging economy and technology, places Avendus very well to take advantage of this telecom moment.”

Take, for instance, its lending business. Avendus bought a non-banking financial company (NBFC), Pacific Hire Purchase, in 2013, and launched the lending vertical in mid-2016, with former RBL Bank executive Sandeep Thapliyal at its helm.

While the likes of KKR, Piramal Finance or Edelweiss are prolific at writing big cheques, the largest cheque from Avendus would hover around ₹70-100 crore. The firm also runs a separate ₹250-crore structured credit fund that co-invests with the NBFC. The next frontier would be lending to small and medium enterprises (SMEs), where Avendus will consider amounts between ₹50 lakh and ₹2 crore.

“Last year, we did about ₹1,500 crore of business in the structured credit segment involving private equity takeouts, acquisition finance and growth capital. We underwrote close to ₹800 crore on our own books and syndicated the rest,” says Thapliyal. “For SME lending, we will reach out to high quality mid-market businesses, use them as anchors and finance their vendors, dealers or distributors.”

The wealth management business, headed by George Mitra, a former Deutsche Bank executive, is built on a similar foundation. “The pitch was the same: Build a complete solution for entrepreneurs. At times they will need money for business, at times they will need to grow, protect and invest their personal wealth, and Avendus will be relevant all the time,” says Mitra. His team manages $3 billion from about 600 clients, about 90 percent of whom are entrepreneurs.


Avendus has also taken a stab at alternative assets management with aplomb. With a $1-billion corpus under Avendus Absolute Return Fund and Avendus Enhanced Return Fund, led by former Ambit Investment Advisers executives Andrew Holland and Vaibhav Sanghvi, Avendus leads the pack in India’s fledgling hedge fund market in less than a year of launch in March 2017, racing ahead of peers such as DSP Merrill Lynch and Edelweiss. The plan is to enter the US with another offshore fund, with an approximately $250-million corpus, by March next year. This apart, Avendus bought UK-based Ocean Dial, a long-only fund with $600 million under management, in August 2017.

The aim to manage $3 billion by 2021.

Amid all this cheer, are several challenges. For instance, hedge funds are fraught with regulatory hurdles. An investment in a category III alternative asset fund for a year will attract a short-term capital gain of about 35 percent. An investment in mutual funds for a similar period attracts none.

“Hedge funds of category III are the fastest growing among all segments. If there is a level playing field from a taxation perspective, we can get head on with mutual funds,” says Holland.

There are competitors for Avendus to fend off as well. Bulge bracket investment banks have started smelling an opportunity in startup advisory as more firms gear up for large fundraises. Wealth management has well-entrenched competitors such as Kotak Wealth management, IIFL, Edelweiss, BNP Paribas and Julius Baer. Even SME lending is a crowded space, with the likes of Edelweiss, Dewan Housing Finance, IIFL, Mahindra Finance, JM Financial and Fullerton India vying for the top spot.

Avendus is likely to sail through, with business verticals leveraging from the strengths of others. The investment bank can refer clients looking for credit to the lending unit, and vice versa. The wealth management team can influence its clients to invest in Avendus’s in-house funds, or even investment banking clients looking for capital.

Sanjay Nayar, CEO and country head at KKR India, sees a silver lining in starting late. “In most verticals, we are the second or third follower, and not the first mover. So, we will learn from other people’s mistakes and build the business the right way,” he says. “It is all about execution now, and it’s not rocket science.”

(This story appears in the 20 July, 2018 issue of Forbes India. To visit our Archives, click here.)