Catamaran Ventures to follow patient capital route in bets on India’s manufacturing push

“Our thesis is based on the view that in order to create wealth and employment in India over the next 5-10 years, the country needs to improve its supply chain for precision manufacturing,” said Deepak Padaki, chairman of Catamaran Ventures. Mint.

Murthy, co-founder of information technology services pioneer Infosys Ltd, is the chairman emeritus of Catamaran.

Over the past year, many funds have deepened their focus on manufacturing as a sector, while others have launched new funds to narrow down the sector’s potential. Much of this is underpinned by private equity and venture capital’s belief that manufacturing and supply chain companies will be what pushes India to become an export-led economy.

“Themes like import substitution (for EMS), rising domestic consumption (for packaging, construction materials) and India’s emergence as an export hub (for chemicals, automotive, engineering solutions, aerospace and defence) are providing long-term structural impetus to companies,” said Koushik Bhattacharyya, managing director and head of industrial investment banking at Mumbai investment bank Avendus Capital. (EMS is an abbreviation for electronic manufacturing services.)

Catamaran has two precision manufacturing investments so far: precision aerospace components manufacturer Aequs and mechatronics manufacturer SEDEMAC. Both companies are heading towards an IPO.

Catamaran has made two investments in manufacturing so far, both of which are geared towards public markets: Aequs, a manufacturer of precision aerospace components, and SEDEMAC, a mechatronics manufacturer, are looking to raise up to R1,000 million through a sales offer. Catamaran also invested in point-of-care medical diagnostics company Achira Labs.

The family office thinks supply chain manufacturing companies don’t lend themselves well to typical venture capital bets, given the long gestation period of such businesses. Most mainstream venture capital funds look for an exit on a five- to six-year horizon.

Considering the changing nature of the activity and the patents around it, manufacturing, which is considered a sub-sector of deeptech, takes a long time, 10-15 years, to emerge at a certain scale. In order for private capital to support such initiatives, they need to be more mature businesses.

“We’re more middle-market private equity when it comes to manufacturing. As a family office, we thought about how we could put money into companies that are patient capital,” Padaki said.

Opportunity sectors

Catamaran is focused on several areas within manufacturing: aerospace, original equipment manufacturers (OEMs) in the electric vehicle space, medical devices, and semiconductor companies.

The family office sees defense as “interesting” while also looking for companies that have reached a certain scale and can go global, few of which it sees. Even on the aerospace side, with the exception of Aequs, the pipeline looks weak despite Catamaran’s desire to do more next year.

But there is more movement from electric vehicle OEMs. “There are a lot of promoter-owned small parts manufacturers in places like NCR (Delhi region) and Coimbatore that are shifting to electric vehicles because we already have a strong base in auto component manufacturing,” Padaki said. “We are more interested in EV supply chain components like engines, electronic systems and so on.”

Catamaran is also seeking support for battery recycling companies that want to reclaim rare earth materials used to make EV batteries.

There are two extremes developing like dumbbells in the field of electronics and semiconductors. On the one hand, there are many startups but they are still at the beginning of their journey, and on the other hand, there are fabrication companies that require huge investments to establish a factory. The catamaran keeps an eye on those in the middle. “We are looking for companies seeking growth capital support in the semiconductor or data center space,” the Catamaran president said.

Checks from the catamaran vary as follows: ₹50 crore ₹250 crore and in some exceptional cases the family office may go up to this figure ₹400-500 crore, especially when companies from outside India want to set up joint ventures for strategic partnerships in the country.

Catamaran previously had a joint venture with e-commerce giant Amazon called Cloudtail in 2014. Amazon bought the family office’s stake in 2021 amid stricter rules for foreign-invested e-commerce marketplaces.

The firm has traditionally been selective about investing, and that doesn’t change until 2026. “Our execution rate is usually two to three investments and for that we need to look at 10-12 companies,” Padaki said. “These are a long process for companies because we have to understand the supporters over a period of time to build relationships. We’re looking at maybe doing two or three even next year.”

Production maturity in 2026

India has witnessed some major deals by venture capital players in the manufacturing sector this year. VIP Industries raised $206 million in a round led by Multiples. Euler Motors raised $75 million from GIC and British International Investments, while Scimplify raised $40 million in a deal led by Accel and Omnivore Partners. Rangsons Aerospace also raised capital in a round led by ValueQuest.

Many of the manufacturing startups that emerged between 2018 and 2020 are now pursuing growth rounds. “There needs to be a shift in valuations,” Padaki said. “The reason a lot of these companies don’t get high valuations is because people don’t understand that these are ROCE businesses and not businesses that are looking to grow at all costs.”

ROCE stands for return on capital employed and is a ratio used to evaluate a company’s profitability and capital efficiency; It essentially gives an idea of ​​how well the company is doing based on the money it spends.

Aequs and SEDEMAC are heading to the public markets, and Catamaran hopes their debuts will set a precedent for other manufacturers’ IPOs. “There aren’t many precedents today where small companies owned by promoters suddenly go public,” Padaki said. he said.

Given how various themes play out in manufacturing and precision manufacturing, both venture capital and private equity players have their ears peeled for companies that are growing sustainably. “While some short-term factors such as tariffs may lead to temporary uncertainty, we see a large amount of private capital entering this sector in the next 3-5 years,” said Avendus’ Bhattacharyya.