Classification based on sector & segment focus of the investment fund:
The term fund is not name or type of any legal entity. A fund might be organised in any legal form. The funds are constituted with a particular investment objective.
In this section, Apohan has made an attempt to classify the funds by their objectives. Following are the types of funds classified on the basis of their objective:
Growth funds:
Growth funds invest in high growth potential companies. The objective of these funds is to multiply their investment in a short span of time (1-5 years). Typically, the risk associated with such growth companies is very high and the corresponding expectation of rate of return on investment is also very high.
Distress asset funds:
The distressed Asset funds look at the lower valuation of the companies in financial problems as an opportunity. Many investors, investment banks, private equity funds, etc are now constituting stressed asset funds in India and the trend is increasing these days.
Restructuring funds:
When a loan becomes a non-performing asset, the bank may not have bandwidth to tap maximum value from that asset. Banks generally don’t entertain enhanced credit for endangered business. They also do not have capability and legal authority to manage the businesses themselves. It is also not worthwhile to liquidate the business as the realisation from liquidation is hardly any. In this case, the bank transfer the assets to asset reconstruction companies at a discount which try to to conserve value by restructuring the business, financing, etc.
SME funds:
There are a plethora of funds that invest in blue chip companies listed on stock exchange and the safest debt instruments, But, the number of funds interested in investing small and medium enterprises directly is unfortunately very small in India. This is basically on account of absence of professional corporate management, strategic plan, financial documentation, transparency and democratic board of directors in the SMEs. Apohan wants to play and instrumental role in bringing up a semi focus investment funds. It is not that only the small and medium enterprises are at fault. Investment funds of all types ask to be lacking the energy, enthusiasm and patience to approach the small and medium enterprises and to carry out all necessary communication. Different simply don’t entertain small and medium enterprises under the pretext of high risk even without carrying out the proper business analysis. Apohan has the unique energy, zeal and enthusiasm to sell the dream of growth and turnaround to meritorious SME businessmen, to explain them the world of mergers and acquisitions in simple language and to take their story to the investors who stand a chance to grow their capital in a much better way then the alternative avenues.
Start-up funds:
There has been a lot of interest in the startups as many startup stories have reached success. Many investors providing capital to the startups at various stages of the business such as seed capital, angel capital, venture capital have come up in thousands of numbers all over India. An investment in a Startup is typically a failure, almost in 95% cases, mainly owing to absence of business experience among the the young promoters. Still, the kind of support startups are getting from the investor communities is of never before kind. Startups are seen and the future of business world. The work with startups is more intensive due to their poor understanding of corporate management, financing and business strategy.
Apohan engages with any stage of a startup provided that they are able to pay retention fees we charge, they have a reasonable expectation of the evaluation from the investors, etc. Apohan does not entertain a startup with “an idea in a mind” nature without a tail or a head, without any investment of own stakes or own money, without concrete efforts for the development of the final product, etc.
Impact funds or Social Venture Fund:
Impact funds desire to invest in the areas that will have a positive social impact. Their main outlook is not absurd kind of financial return. They do desire to be profitable and want to have a decent return on their investment, but they want to impact lives of millions of people. Typically, their focus sector are health, education, sanitation, environment, food, renewable energy, etc.
Charity funds:
There are many charity funds that will provide capital (in the form of a grant which expects no return) to businesses that will help in one or other social cause. Such help is provided to the business till it becomes self dependent. The objective of such charity funds is to create huge employment and social prosperity through promotion of entrepreneurship. Charity funds would prefer donating to those companies that fulfill the criteria of performance in terms of number of beneficiaries and the quality of service. Funds would prefer that the company availing funds is registered under Companies Act appropriately. The financial concession by these funds can be in three ways: 1. Substantially reduced rate of interest; 2. No requirement of payment of interest for no expectation of return on investment; 3. No requirement of repayment of the the original capital amount.
India Funds:
There are many funds that are based outside India focus is to invest in India. They see India as a promising upcoming growing market and the expect that the returns in this market will be much higher than the saturated developed markets.
Emerging market funds:
Emerging market funds want to invest in countries like India, Brazil, Russia, South Africa, southeast Asian countries, etc. The attraction of investment in the emerging market is against the saturation of growth in the developed markets. One of the major risks for investment in the emerging markets from the perspective of investors is the risk of exchange rate.
Sector funds:
There are certain funds that are focused only in specific sectors such as technology fund, infrastructure fund, telecom fund, e-commerce fund, food fund, etc. Find specific comfort with respect to hope of growth, stability, and acceptable degree of risk. There are two categories of sector funds:
New-age technology funds:
These days the rage is technology funds which invest in new-age technologies such as blockchain, virtual reality, drones, robotics, artificial intelligence, navigation, genetic, location based services, holography, 3D printing, natural language processing, mobile apps, renewable energy, green energy, electric vehicle, big data, networking, biometrics, CCTV cameras, internet of things, etc.
Conventional sector funds:
These funds invest in in the conventional businesses real estate, transport infrastructure, energy infrastructure, social infrastructure, core sectors such as steel, cement, other sectors such as pharmaceuticals, food, water, automobiles, engineering ,etc.
Microfinance funds:
Microfinance funds lend in extremely small amounts such as a few thousands or a few lacs to the marginalised and poor people to start a very small business or a small shop. That typically don’t ask for any security. The rate of interest is also reasonable. Apohan as such is not in the business of making microfinance deals as they are too small. However, Apohan formulates strategies for microfinance funds.
Apohan very well understands the orientation of all these kinds of funds in making investment through mergers and acquisitions. Apohan helps a small and medium enterprise, in identification of the funds that might be most interested in them and add more value. Apohan carries out professional, end-to-end, customized consultancy services by understanding how to successfully approach and obtain investment from these funds. Apohan can manage the transaction right from the problem identification phase, to the closure of deal with perfection.