Exploring the opportunities of India’s digital landscape

Amid the COVID-19 pandemic, digitisation has emerged as a leading agent of growth and development across the world. To explore the effects of digitisation on the business landscape, TVS Capital Funds hosted its Annual Client Partner Conference centred around the theme of a ‘Digitised India’ on May 21, 2021. The conference featured multiple industry experts, family office investors along with the business partners of the TVS Shriram Growth Fund 3. Here are some of the highlights of the conference:

Investments in digital opportunities adjacent to Fund’s focus sectors are key to fund strategy

The conference began with an opening address by Gopal Srinivasan, Chairman and MD, TVS Capital Fund. He expressed his gratitude to India’s family offices for their continued trust in the fund, both as investors and partners.

“Over 70 of our partners have invested around 1.7 times the amount of the second fund in the current third fund. Between September and December, you invested around Rs 400 crore more and have entrusted us with multiplying this money. Our aim for the third fund is that it outperforms our track record. We look to invest a total of Rs 500-600 crore in this calendar year,” he said.

Given the rapid pace of digitisation in India, Gopal said that the fund’s aim is to invest in tech-based adjacencies of existing focus sectors for TVS Capital. He added that the fund will adopt a bi-modal investment strategy, investing in Series B and Series C funds on one hand and late-stage investments on the other. He concluded his address by stating their plan to begin raising Fund 4 at the end of next year, and in interest of increasing the fund size - reaching out to global family offices.

A roadmap for digitisation of financial services

The investment team provided an overview on the status of the fund’s investments in DCB, Suryoday Small Finance Bank, Go Digit, LEAP India and Five Star Business Finance. Moreover, senior leaders from these companies outlined their digital strategy in driving growth and improving efficiencies.

The portfolio overview was followed by a panel discussion on the impact of digitisation in the financial services space, and opportunities one can leverage in the future. The panel consisted of Bijith Bhaskar National Head - Digital Banking, Partnerships and E-Commerce at ICICI Bank, and Gaurav Kumar, Founder and Director of Vivriti Capital and CEO of CredAvenue. The discussion was moderated by Amit Jhanvar, Director at Unitus Capital.

Bijith noted that innovations and infrastructure carried out by FinTech startups, will be leveraged by the entire sector as it helps “understand customers better, underwrite better and use data better.” However, reducing liability was a potential challenge.

Gaurav also stressed on the contribution of FinTech companies in building disruptive solutions but noted that there continued to be great scope for innovation. “A lot of compelling solutions have to take place in underwriting, collateral management, evaluations and risk management. Last mile connection is very important, we must not undermine distribution and collections at the last mile,” he said.

Both the panellists offered their views on the future of innovation in the sector. Bijith believed that lending and investments are two areas where niche, end-user-based cases will develop, while Gaurav saw potential in fixed income markets.

Understanding liquidity needs and risk appetite are crucial for asset allocation.

The panel discussion was followed by a fireside chat featuring Prashant Mehta, Chief Investment Officer, KEF Holdings and Mohit Dhawan, VP and Head, Strategy, investments and M&A, Hero Enterprise. They shared their perspectives on investing in turbulent markets.

Prashant explained that understanding one’s liquidity requirements was the foundation of drafting an optimal asset allocation strategy. He gave his perspectives on turning a crisis into an opportunity. “A crisis is an opportunity in disguise. The conviction to buy at that time comes after you have learnt and re-learnt in good times. If you have missed out on something, keep it on your radar, keep learning so that you have the conviction when the time comes again,” he said.

He also spoke about the importance of eliminating biases. “In a crisis, you will end up owning something that might hurt you. You have to learn to forgo the pain and not rule out that asset class, because it will eventually do well at another time,” he noted. The chat ended with a call for optimisation for risk tolerance before moving onto asset allocation and solving for consistency of returns rather than superiority of returns.

Developing the right platform is key to driving customer value:

The conference culminated with a talk by V Vaidyanathan, MD and CEO, IDFC First Bank, on opportunities in a digital-first world. “The new ecosystem has become very digitised. If we can capitalise on this ecosystem, then amazing things will happen,” he said, adding that while new banks do not have a large number of customers and a large loan book size, the advantage is they can build a new stack that is unencumbered by legacy systems, and drive value by building the right platform.

“My personal conviction is: It doesn’t matter how smart you are, how intelligent you are. You need to have the right platform. Building a fantastic intellectual property, intensely focusing on the space we are after, having the latest technologies, solving a problem of the masses, staying on high levels of corporate governance will eventually lead to the RoI and RoE,” he said, adding that taking shortcuts will only hamper long-term progress in this regard.