How The Wealth Company is unlocking growth opportunity for SMBs in Tier II and III cities

Small and Medium Businesses (SMBs) are the backbone of Indian economy, driving innovation, creating jobs, and contributing significantly to the country’s GDP. However, due to lack of resources and capital, they are unable to grow and compete on a larger scale.

Over the last decade, Madhu Lunawat has been focused on addressing these very challenges with The Wealth Company, an asset management firm.

Hailing originally from Assam, Lunawat graduated as a chartered accountant and started her career at Infosys before moving into the financial services world in Mumbai. After stints at ASREC, Edelweiss, she co-founded the Pantomath Group, a diversified financial services entity, in 2013 with Mahavir Lunawat. The Wealth Company is a part of this group.

Lunawat says, she felt the need to do something different if she had to stand out in the marketplace as conventional financial services was a crowded market in a city like Mumbai. She realised that the real opportunity was in Tier II and Tier III industrial towns of India.

“We saw the data and realised that 55% of the employment generated in the country are from these industrial clusters, contributing to 48% of country’s GDP and no one was visiting them,” she says in an interaction with SMB Story.

Despite facing gender-related biases, Lunawat persisted, driving The Wealth Company to focus on addressing the unique challenges faced by SMBs in accessing capital and resources.

Unlocking growth

According to Lunawat, a significant number of SMBs were reasonable in size and operating a profitable business, but did not know how to orbit onto the next level of growth.

To understand them better, she travelled across the country to meet entrepreneurs and owners of these businesses.

After her research, Lunawat realised that the primary source of capital for many of these businesses has been bank debt or raising money from friends and family.

Hence, she started The Wealth Company to help these businesses access private equity, which is generally capital where one does not have to pay interest like a bank loan. Also, one gets credible investors onboard who are interested in taking a company to the next level.

“These entrepreneurs are generally very apprehensive about taking private equity as they are worried about their ownership and about conditionalities,” says Lunawat.

“It took a lot of time to convince them and make them understand why equity is good for their business to grow multi-fold,” she remarks.

Today, The Wealth Company has a database of around 8,000 such entrepreneurs with in-depth understanding of their business.

How it works?

The Wealth Company generally looks at those businesses that have an average revenue of around Rs 300 crore plus, and are profitable.

It looks at around four to five parameters before investing in these companies. Firstly, the business should have a revenue above Rs 300 crore. Secondly, it looks into the management bandwidth on whether the founder or entrepreneur has the second line of leadership. Thirdly, it should have built its own tech tool to check through the audit reports on the credit status, legal standing in what generally comes under forensics, and lastly, there are numerous informal meetings to understand the company and people better.

“Our USP is that we close the transaction in two months’ time,” says Lunawat.

The average deal size is around Rs 100-150 crore.

Lunawat says, The Wealth Company is able to accelerate the growth trajectory of such businesses, professionalise the management, help them tap into larger markets and lastly clear the path for a public listing.

“We provide them with end-to-end service and handhold them through this journey,” she remarks.

Funding and way forward

Today, The Wealth Company has assets under management (AUM) of around Rs 10,000 crore, with 25 companies under its portfolio. Lunawat said, in 2024, the company’s portfolio companies saw a compound annual growth rate (CAGR) in revenue exceeding 50%.

The company has also launched three funds. The first one, launched in 2022, is the India Inflection Opportunity Fund, with a size of Rs 500 crore. The second one was Bharat Value Fund – II, launched in 2024 with a size of Rs 2,000 crore, and the ongoing one is Bharat Value Fund - III of Rs 2,500 crore size.

Lunawat says, limited partners or investors in The Wealth Company’s funds are primarily Indian investors and they very well understand what this asset management firm is trying to do.

“These LPs are business owners themselves and perfectly understand what we are trying to do,” says Lunawat, and adds, “We always have an investor-first approach.”

This would mean The Wealth Company ensures that the wealth is always protected. For example, the company returned 60% of the money to the investors within seven months of closing of the first fund. “The most important thing for any investor is how we can manage the risk,” she remarks.

On the future roadmap, the founder says the company will continue to focus on businesses in Tier II locations and help entrepreneurs become important players in the ecosystem.

Lunawat says, today, there is also a change in the way these businesses look at her. “Today, they are much more welcoming because as women, we are much more empathetic, careful, responsible, and rock solid. We deliver what we say.”