Aavishkaar Capital: Re-Defining Investment Across Africa

Aavishkaar Capital: Re-Defining Investment Across Africa;

Aavshkaar Capital, a pioneer impact investment firm, is celebrating a remarkable milestone – over 20 years of driving positive change in Asia and Africa.

Founded in India, the company has expanded its reach to cover the two continents, with the latest dedicated focus on Africa, led by its Managing Partner, Ashish Patel.

**Aavishkaar Capital Managing Partner,Ashish Patel**

In 2001, Aavishkaar Capital led the way in introducing the venture capital strategy of backing early-growth stage businesses in India, emphasizing regions and industries typically neglected and difficult. Since then, the firm has successfully concluded 8 funds, now managing nearly half a billion dollars in assets under management.

Aavishkaar stands out in the investment landscape with a commitment to positive impact outcomes, diverging from the traditional venture capital firms (VC) that primarily focus on financial returns. The company’s investment strategy integrates financial returns with environmental, social, and governance (ESG), ensuring a balanced approach that promotes sustainability and measurable impact outcomes alongside profitability.

“The firm seeks to create a triple bottom line, where every investment not only yields financial returns but also leads to tangible social and environmental benefits. This means supporting businesses that create employment opportunities, improve livelihoods, promote women’s empowerment, and adopt sustainable practices,” Ashish notes.

The Approach

The firm typically invests up to USD 10 million in early-stage growth companies. It targets businesses that align with the following criteria:

Have a strong management team able to capitalize on market opportunities.Business model is strongly aligned with impact outcomes
Provide goods or services to those that do not have access to such services.
Possess a business model capable of significant scalability within 4 to 5 years.

Sector Prioritization and Investment Strategy

In Africa, the company has identified a critical need for debt-like instruments to support small and medium-sized enterprises (SMEs). Many of these businesses struggle to access banking facilities due to lack of collateral, complex group structures, etc. The firm has responded by prioritizing investments in sectors with high environmental and social impact, where management teams are not only competent but also aligned with the firm’s values.

Ashish notes that they have prioritized investments in sectors with a higher climate, environmental or social footprint. “Our strategy in Africa has evolved to favor debt-like instruments addressing the unique challenges faced by SMEs in accessing traditional banking facilities. This approach has enabled us to provide essential capital while fostering sustainable business growth,”

The company’s investment strategy is designed to support strong management teams, empowering them to excel in their respective industries and generate returns that benefit both investors and the wider community.

Investment Criteria

Aavishkaar Capital’s investment criteria revolve around three core aspects: the quality of the management team, alignment of management team with our environmental and sustainability goals, and the potential financial outcomes.

Furthermore, Aavishkaar supports investee companies with business planning, technical assistance, and capital for capacity building, helping them improve ESG practices.

“Our team here in Kenya helps many SMEs around business planning before we invest, which would mean developing a five-year plan, including strategy development with the business owners to understand how far and what could be achieved if they had access to capital. Very few VCs or investors do that because they are expecting ready plans from their potential investee companies,” he notes.

He also indicates that the firm supports businesses with a significant amount of technical assistance and support by professionals to help them bring about improvements in environmental and social practices through an enhanced environment and social management system, an EMS system, and or helping them recruit the right type of individuals.

This rigorous evaluation ensures that investments not only generate financial returns but also deliver meaningful social and environmental benefits.

Successful Investments in Kenya

Aavishkaar Capital has made notable investments in Kenya, demonstrating the effectiveness of its impact-driven approach.

Hela Intimates EPZ (Hela): Based in Athi River, Hela expanded significantly after Aavishkaar’s investment, increasing its workforce and improving its environmental practices by transitioning to solar energy and steam recycling. The company also introduced social initiatives like baby crèches to support working mothers.
Balaji Group: This Nairobi-based textile manufacturer has benefited from Aavishkaar’s support in enhancing its management information systems and ESG governance, solidifying its position in the industry. Aavishkaar financed its expansion into reduced pollution dying for the jeans it manufactures.
Privam Nuts: Located in Embu, this macadamia nut processor has leveraged Aavishkaar’s investment to double its processing capacity. The company focuses on traceability and environmental management, impacting local farmers and employees positively.

*Ashish Patel,Managing Partner,Aavishkaar Capital*

Measuring and Ensuring Impact

Aavishkaar Capital places a strong emphasis on measuring the impact of its investments. Through evaluation of the ecosystem that each business supports and monitoring employment quality and sustainability practices, Aavishkaar looks to improve livelihoods and environmental outcomes. “Before we look at any investments, we first understand the business model, who benefits and how, impact on the wider community etc.

Businesses that can demonstrate a direct or indirect impact on the wider community and the ability to produce returns are our picks”. The company’s focus on export-oriented businesses also helps accelerate and spread economic benefits across Kenya. “It’s about spreading the wealth or creating wealth capability across the country as opposed to concentrating it only in a single county,” he says. Ashish runs by the mantra “Sow, Tend & Reap” which he says is a strategy their founder had from day 1. He indicates that it’s a strategy that the firm is pursuing in India which has resulted in the firm seeding extremely young businesses like Arohan – an Indian based microfinance startup.

“Arohan has grown substantially over the years, with a lending book of over 700 million US dollars today and it started from almost nothing.

We eventually exit to crystalize value for our shareholders” he indicates.

Aavishkaar Capital Managing Partner,Ashish Patel during the launch of the of ‘ESG First Fund’in Nairobi in February 2022.The Investments Firm is the impact fund manager of the Aavishkaar Group, a global pioneer in impact investing

Future Plans

Looking ahead, Aavishkaar Capital aims to scale up its credit/debt propositions for SMEs across Africa, with aspirations to move into equity positions similar to its operations in India. The company is bullish on Africa’s potential, seeing ample opportunities for growth in financial services, technology, and more.

Through initiatives like the Sankalp Forum, Aavishkaar fosters collaboration and learning among businesses at different growth stages, guiding future investment opportunities.

Balancing Work and Personal Life

Ashish Patel, Managing Partner for Africa at Aavishkaar Capital, balances his professional responsibilities with a passion for nature, fitness and family.

When not at work, he enjoys walking, exploring the bush, or staying active in the gym.

Message to Investors, Kenyan SME’s and Entrepreneurs

The ESG First fund underscores the unique partnership that we at Aavishkaar Capital have built with KFW Group to develop rapidly innovative products and launch them quickly with trust and long term impact as the bedrock of this partnership. We exhort other development finance institutions looking to enhance ESG impact to join us in delivering significant impact and generate attractive returns whilst bringing about a significant positive change in the lives of the people.

Our focus is to help businesses scale by allowing them to participate in the significant growth of consumer demand for ‘socially-conscious products’.

We will support our partners to develop stronger ESG standards and share the benefits of our south-south leanings. Additionally, our investment approach of providing flexible solutions across the capital structure will help businesses which may not be ready for an all-equity or all-debt solution, or where shareholders may not wish to dilute.

Aavishkaar Capital invites Kenyan entrepreneurs with established businesses seeking growth capital to reach out. With a focus on the export market, particularly to the European Union, United States, and UK, Aavishkaar is eager to partner with businesses that align with its impact and sustainability goals. Entrepreneurs can contact Aavishkaar at ESGfirst@aavishkaar.in for potential collaborations.

Please visit Aavishkaar’s website at www.esgfirstfund.com.

Aavishkaar Capital’s commitment to impact investment sets it apart in the African market. As it integrates financial, environmental, and social outcomes, Aavishkaar not only drives business growth but also contributes to broader societal and environmental goals.

With ambitious plans for the future, Aavishkaar Capital continues to lead the way in sustainable and impactful investing.