IIFL Wealth and Asset Management plans to set up a category-II Alternate Investment Fund (AIF) to capture opportunity to participate in follow-on capital raising of digitally break out companies which are dominant in their segments, a top official said.

“This will be a new fund and it will be a Cat II AIF. An opportunity to participate in follow-on capital to break out digital companies exists today and plugs an important gap in client portfolios as we see society taking the technological leap forward. We will look at capturing such investment opportunities through a Category II AIF,” Umang Papneja, Senior Managing Partner and Chief Investment Officer, IIFL Wealth Management, told BusinessLine .

He highlighted that worldwide one is witnessing an acceleration in the trend of users adapting and using disruptive technologies. “The most innovative parts of the world economy have suffered the least damage. India will be no different and opportunities in EdTech, MedTech, FinTech will witness immense value creation possibilities as we see large investments in such technologies in Covid19,” he said.

Papneja noted that in India, there are a number of companies where the product/service is well established and enjoy a dominant position in the segment they operate. In India most of the innovative companies are not listed here. They are available on the private equity and venture capital side, he said. “If you are transitioning from pre to post Covid, these digital companies will be large part of economy everywhere including India. There is strong case for every portfolio to have new generation business as well, which have already reached some level. There is sound investment case for such Digital break out companies,” Papneja said.

He also said that IIFL is interested only on investing in, say, 10 break out companies. “We don’t want to invest in 50-60 companies like how a venture capital firm does and hope that out of these 50-60 companies, 10 will break out and make money. We want to come only in the 10 companies that have been discovered and funded so that they can grow and ride the wave. We don’t want to go in companies that are early stage and hope their ideas will be successful,” Papneja said.


He said that many of above mentioned opportunities are available in the international listed markets like the US, Israel, etc. Besides the benefits of portfolio diversification, investors are seeking a slice of these global disruptive companies in their portfolios. The access is available through locally available international feeder funds and platforms offering access for remittances done under the Liberalised Remittance Scheme.

Investing in international equities should enhance risk adjusted returns by reducing overall portfolio risk and volatility over time. “Our internal experience shows around 20 per cent exposure to global equities leads to reduced volatility and improved returns for the portfolio”, he said.

Meanwhile, IIFL Wealth and Asset Management reported a net profit of ₹86 crore for the second quarter ended September 30 this year. This was up over ₹70 crore recorded in the same quarter last fiscal.