A mid-market, sector focused
independent private equity firm

Arth Capital targets deals with management control or deals where they have preferential access to cash flow and assets. The team believes in value oriented investing in sectors, segments and themes that it understands well. Team focuses on opportunities to partner with entrepreneurs and management teams that are willing to invest in businesses along with Arth Capital to create value for everyone involved.

We see great potential for deals across the buyout spectrum – growth buyouts, spin-offs and management buyouts.

Growth Buyouts
India has a large number of mid size successful businesses built by first generation entrepreneurs. These businesses face several challenges such as succession issues, capital constraints and inability to hire senior professional talent; consequently find it difficult to scale up to the next level.

Spin - Offs
There is an increasing trend among large Indian corporations to focus resources on core businesses which is leading them to exit and monetize non-core assets.

Management Buyouts
There are various businesses where the existing management perceives a much stronger growth potential than the current owners. These managers are also seeking a higher stake and greater independence.

Arth Capital seeks businesses that have a leading or a niche market position, potential for operating improvement, domestic demand driven, limited export dependence, diversity of risk with customers and suppliers. These businesses could have top line of $20-100M with 15% or higher EBITDA margin. Arth Capital supports such businesses with capital, managerial expertise and better corporate governance.

Arth Capital believes, there exist high quality assets, in India, that face short term issues that are largely financial in nature. Such assets can be turned around in the short to medium term through capital infusion, debt restructuring and realignment of equity interest.

We target businesses where the demand is stable and growing based on long term macroeconomic environment, risk of industry or product obsolescence is limited, and there is strong strategic interest. These opportunities present themselves as a consequence of cyclicality in various sectors, project cost overruns (last mile financing), convertible bond repayments falling due, need of specific shareholders to exit, etc.

We seek to partner seasoned promoters and existing management who have seen tough times in the past, and need a partner to help them come out of a current rough patch. Our team has solid experience of executing many leading deals of this nature, and has experience to structure a deal with debt and equity that solves the company’s needs adequately.

The growth in our focus sectors is driven largely by domestic demand. The team aims to identify companies that are well positioned to harvest this growth potential. The team has deep experience of investing, operating companies in these sectors which gives them the ability to identify trends early and capitalize on them.

Manufacturing

Clearly identified sub sectors for buyouts and special situations

Engineering

Skills based companies that serve domestic demand on the back of global competence

Healthcare

Cost arbitrage in manufacturing; under penetration in services

Consumer

Heavy fragmentation, favorable operating characters such as low capital intensity, high cash flow from operations create M&A opportunity

We at Arth believe in value added investing, and bringing an entrepreneurial zeal towards our portfolio companies.

We not only provide capital, but also a platform to entrepreneurs and management teams to help scale up their businesses. We meaningfully contribute on various operational and financial aspects that enhance profitability and competitiveness of the business. We help the management evaluate organic growth opportunities through extensions, new launches and portfolio expansion, identify inorganic routes to growth as well as help expand margin through business efficiencies.

Additionally, with our portfolio companies, we seek to enhance governance and transparency that is a must to attract quality investors in future. Similarly, our long term engagement with the various relevant ecosystem participants has created mutual trust which also allows us to bring the right advisors to our portfolio companies creating a win-win scenario.

The Indian private equity market faces challenges emanating from investors being very dependent on the company management to create an exit through an IPO.

The team is very clear that a definite path to exit has to be one of the top pre-investment priorities for the fund. We believe that our investment strategy of buyouts and special situations eliminates many exit related issues. Pre-existence of control in our deals enables us to do a trade sale or have a structured exit; thereby creating a genuine alternative to the volatile IPO markets. This allows both the management and the fund to concentrate on the operations of the company.