Sundaram Alternative Opportunities Fund – Nano Cap Series I & II (CAT III)

A 4 year close ended Cat III AIF that will invest in 15 to 25 high conviction nano cap stocks – market cap less than ₹ 1,000 cr.

Investment Strategy

Sundaram’s strategy is founded on

  • Sound Businesses with visible growth and profits
  • Management’s focussed on creating shareholder wealth
  • Strong Financials – efficient capital allocation, high return ratios

Fund Highlights

  • Under Invested, Under Researched segment between VC and Small caps-offering potential for outsized returns in a patient long term investing style

  • Opportunity to leverage on Sundaram’s Research which constantly throws up several high potential investments

  • Endeavour to meet the Management of the Investee companies quarterly

  • Identify companies with potential for strong growth that can expand into higher valuations

  • Invests in stocks predominantly with a market cap of ₹ 1,000 / 1,500 crores and below at the time of initial investment

  • Absolute Target Return Fund - Focused Portfolio of 15-25 companies, averaging around 20

  • 4 year close ended fund with limited exit window and an early exit gate

Sundaram Alternative Opportunities Series – High Yield Secured Debt Fund (CAT II)

A Close Ended Category II AIF (approved by SEBI) which will invest in high yielding debentures and selectively in mezzanine securities* issued by Indian Real Estate developers/Companies; fully secured by monetizable real estate assets in addition to other assets/cash flows

Rated BWR Level 1 (AIF) & CARE AA+ indicating top rating based on the Investment Process and Fund Management Capabilities of the manager.

Key Product Features

Instrument Structure
  • 100% of the deals to be debt focused with fixed returns from coupons and redemption premiums. Within this:
    1. ~75 – 80% of the portfolio to be focused on self-liquidating residential real estate projects
    2. ~20 – 25% of the portfolio may also participate in security backed special situations deals that could have commercial assets/other physical collaterals
  • Typically 2 – 3 year deals; but with amortising loans, capital will come back to the fund in 1.5 – 2 years/deal
  • Endeavour to create a diversified portfolio of 15 – 30 companies
  • Single company exposure limited to a max of 20% of the fund
Estimated Returns
  • 17–21%* gross IRRs (INR) from a mix of transactions at various stages (Early, intermediate and late stage); though the fund will largely focus on post approval projects and not take land stage risks unless backed by existing cash flows
  • Business cash flows are base case exit routes for loans i.e., non-capital markets correlated
  • The Investment Manager aims to deploy the fund within 18 months of closing***
Key Fund Strategy

Current strategy is to deploy ~$100 – 150 million pa over the next 3 – 4 years in key South Indian RE opportunities

Focused Product & Customer Strategy

Opportunistic high yield (18 – 21% IRRs) secured credit to

  • Tier 2 & 3 developers predominantly in Chennai, Bangalore, Hyderabad & to a smaller extent, other select micro markets like Pune / Mumbai for early stage working capital needs/refinancing on-going projects backed by mortgage + cash flows

Medium yield (15 – 17% IRRs) secured credit to:

  • Tier 1 developers for corporate funding backed by cash flows
  • Select Tier 2 & 3 developers for construction finance and working capital purposes (i.e., relatively lower execution risks) backed by mortgage + cash flows