Financial Re-Engineering Is Dependent On Right Capital Structure: Founder, Avener Capital
If India has to achieve a target of a five-trillion-dollar economy, a higher level of participation is required from mutual funds and insurance companies, even within the unlisted domain
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The Mumbai-based modern financial consultancy firm and business accelerator, Avener Capital, specialises in 'financial re-engineering' and helps businesses raise capital from the private market. Additionally, it strategically invests in promising start-ups, which encourages innovation and speeds growth.
In an exclusive conversation with Shivam Bajaj, Founder and CEO, Avener Capital. Below given are the edited excerpts -
According to you, what are the major challenges as far as fundraising is concerned in the Indian market?
I think the domestic market will continue to be limited. India needs to have a more evolved bond market that's more certain if we have to achieve the target of a five-trillion-dollar economy. Secondly, I think a higher level of participation is required from mutual funds and insurance companies, even within the unlisted domain, because most of the capital coming into the unlisted domain is predominantly foreign capital.
Is there any hindrance among investors in the Indian market as far as bonds are concerned?
Domestically, the hindrance that is there is that, in general, banks are flushed with liquidity, and banks have a lot of liquidity due to which they are not able to, or they do not distinguish between the risk and the reward. So, effectively, what happens is that even for the riskier credit, banks are ultimately still lending to slightly riskier and lower-rated assets as well, at competitive interest rates compared to what the bond market would be able to lend to them. So even with AAA-rated assets, for instance, domestic markets would price them slightly higher as compared to what banks would be able to lend at.
From an investment standpoint, I wouldn't really call that a hindrance. But one of the key hindrances that I see is, of course, the development of the bond market for us to be able to achieve our targets.
What do you mean by financial reengineering?
Financial re-engineering is dependent on the right capital structure and, ultimately, sorts of re-engineering of the capital structure through the right combination of debt and equity. It is effectively working on the right capital structure and optimising that capital structure in order to enhance shareholder value.
Is there any difference in consumption patterns among the masses after the pandemic?
The infrastructure bounce back has been very robust. I think if I look at the toll road sector, collections have been extremely robust and a lot of large foreign institutional investors have shown a good amount of interest in the space. If one looks at the green energy space, there have been strong reforms within the overall green energy space, propelling growth for renewable energy, be it solar, wind, or potentially upcoming in terms of green hydrogen. So I would say that a lot of additional capacity for renewable energy has been inducted. If I talk about real estate, flat sales have been very robust and I think they are sort of different from state to state.
What would you advise our young entrepreneurs?
The idea of most people today is to look at chasing capital, valuation, and funding, and at the cost of that, they tend to overlook or ignore the most important basic, which is free cash. The advice is to ultimately keep the focus on building a long-term sustainable business that is focused on the generation of free cash. Startups will be able to tick all the needed boxes of deal-evaluation metrics of private equity (PE) investors and venture capital (VC) companies if they get the basics right and set things up for the next level of growth. The emphasis should be on developing a sustainable, scalable, and resilient company model capable of influencing future market trends.
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