Creation Investments Sets Up India-Focused $100 Mn Debt Fund

Global impact investor Creation Investments Capital Management LLC has set up a debt fund in India, for which it will raise $100 Mn to invest in the country. The alternative investment manager which is focused on financial services and financial inclusion for the underbanked segment of the population has appointed Remika Agarwal as its vice-president and India head. 

Creation focuses on private equity investments in microfinance institutions, small-and-medium enterprise lenders, emerging market banks, insurance providers, fintech, payments businesses and other financial service institutions focused on the unbanked and underbanked in the developing world. In India, its new fund will focus on providing debt financing to non-banking financial companies (NBFCs) serving the population in areas such as micro-lending, affordable housing, vehicle loans, small- and medium-enterprise lending (SMEs), and education finance. 

“We aim to expand and accelerate our investments in the world’s second-most populous country through our first debt fund and other initiatives,” said Patrick Fisher, founder and managing partner at Creation Investments.

Over the past 10 years, Creation claims to have invested funds worth $300 Mn in several Indian companies specialising in microfinance, SMEs, fintech, payments, agri-warehousing and other related businesses. Some of the companies in Creation’s India portfolio include Eko India Finance, which raised $5.5 Mn in a venture round in 2011 and subsequently in 2018 as well; Capital Float, which raised $25 Mn from the firm in 2016; and Vivriti Capital, which raised INR 100 Cr from Creation in September last year.

Creation’s India head Agarwal said that the firm’s portfolio companies, which have withstood unimagined disruptions such as demonetisation and Covid-19, are on a strong financial footing. “We continue to seek investments in companies that have robust business models, strong management teams, and sound environmental, social, and corporate governance credentials,” she added.

According to a recent Inc42 Plus report titled, “Inside India’s Startup Venture Debt Funding Boom Report, 2020,” between 2019 and 2020, there was a 2x surge in total venture debt funding in Indian startups from $217 Mn to $427 Mn. This underlines the growing demand for venture debt during the pandemic times and given this, 2020 was by far the best year for venture debt funding in India. 

As per the deal count, ecommerce (30 deals), consumer services (29) and fintech (27) were the most preferred sectors for venture debt funding rounds between 2014 and 2020. This is primarily due to the fact that these sectors combined make 47% of the total funded growth and late-stage startups in India during this time.