Nandan Capital | Investment Philosophy

What do we look for before Investing?

Nandan Capital has defined a clear standardized strategy when it comes to screening companies: A standalone deal is considered for further due diligence if it abides with atleast 4 out of these 6 criteria:

Operating
history

More than 2 years

Annualized
revenues

Greater than INR 15 crores

Adjusted D/E

Less than 3 times

Overdue
debts

Debt of more than 180 days to be less than 10% of revenues

Founder
experience

More than 4 years

Profitable/
cash runway

More than 6 months

Sectors We Avoid

Deep Tech

Requires significant technology expertise to evaluate long gestation period, usually binary outcomes

Govt Focussed Revenue

Could face payment delays, high possiblity of litigation, may have impact based on Govt changes

Unit Economics Negative

Growth at negative economics is taboo for a debt fund. Unlike Venture Debt, the focus is on profitable growth, not valuation driver growth

Capital Projects

The focus is on Performance credit, allowing easy instalment based returns of principal as well. Bullet repayment structures remain risky for us unless backed by significant collateral and existing cashflows

Prior Disbursement Samples

Leading women's ethnic brand of East India

Need for expansion capital
Bank limits exhausted - but expansion through COCO stores, requiring capital
Analysis: Hight ROCE, comfortable interest coverage ratio, High store level profitability, expansion would significantly add to operating leverage benefits.
Security: Working capital, brand, inventory, personal guarantee

Electronics manufacturer on route to SME IPO

Electronics supply in Northern India (Offline channels)
YoY growth of 50%+; Bank limits exhausted; Need for working capital
Analysis: High ROCE, comfortable IC Ratio, comfortable DE Ratio, IPO documents ready, strong distribution chains across markets, very little credit sales/ outstandings
Security: Working capital, brand, personal guarantee

Fast Fashion Retail chain (South India)

Need for working capital for opening new stores before Diwali season - YoY growth of 60%+
Bank limits exhausted
Analysis: High store level ROCE, slightly EBITDA negative at corporate level but each store exceptionally profitable, with high ROCE and only 3 more stores needed for BE. Equity already locked in.
Security: Working capital and inventory, brand, personal guarantee

Investment Philosophy

Sector Agnostic