CXOtoday News Desk

Mr. Sumegh Bhatia is the CEO  & MD of Lighthouse Canton, India. He is an extraordinary business leader with over two decades of experience in private banking and wealth management. In his current role, he is responsible for expanding Lighthouse Canton’s business with differentiated strategies and highly personalized services for clients. He is working towards positioning Lighthouse Canton as an Indian EAM with International credentials. He understands India’s dynamic wealth management market and is poised to provide Lighthouse Canton with the right direction in the coming years.

 

  1. 1. Brief us about Lighthouse Canton’s operations in India? What are the plans going forward?

Lighthouse Canton started its operations in India in June 2020 with the LC Capital India business. The firm is currently headquartered out of Delhi with offices in Mumbai, Bangalore, and Hyderabad managing an AUM of Approximately $ 0.5Bn. Today we work closely with 70 plus large family offices across India and are expanding our market offerings that would bring significant value to our clients. We have also recently launched our flagship venture equity fund LC Nueva Alternative Investment Fund (AIF) and made the second close with Approx. $40Mn on 31st May 22.

Going forward, we plan to expand our footprint both in terms of markets covered & inhouse investment strategies and will be bringing forth some interesting solutions for our clients in India, subject to the necessary approvals by the Securities and Exchange Board of India (SEBI).

 

  1. What is the acceptance and potential of Alternate Investment Funds in India? What is your portfolio?

To answer this question, we first need to understand the objective with which AIFs were structured. AIFs are private placement funds with a minimum commitment of INR 1Cr with sophisticated non-conventional investment strategies. AIFs are designed for sophisticated Ultra High or High Net Worth investors (U/HNWI) with investment needs that cannot be catered to by conventional funds.  We have now established the correct target segment for AIFs and these products are not meant for retail investors. The acceptability of AIFs in the said customer segment is quite high and is increasing by the day. Also, in terms of future potential while the AIF ecosystem in India has come a long way over the last 5yrs. According to a Preqin report the industry has doubled to $72billion as of September 2021 from $36 billion in 2016 end. With India’s rising wealth, and many families and U/HNWI looking to diversify their portfolios, there is much potential for this to grow even more. However, I do believe there is scope for a lot more product innovation, and more alignment with investors’ interests. This is an area Lighthouse Canton is actively working on through our Asset Management business.

Our first AIF, LC Nueva, was a fund launched through our partnership with Nueva Capital. The fund focuses on venture equity and invests in 25 – 30 Indian companies at the pre-series A and series A stages. The investment committee’s approach is sector-agnostic, with a proclivity towards health-tech, consumer-tech, fintech & education-tech businesses, steering clear of capital-intensive businesses. A sizable part of the fund will be reserved to back the winners in the subsequent rounds.

Our team is also working closely with investors to understand their investment objectives and needs on a long-term scale to develop other AIF strategies and provide investment solutions that are in line with their interests.

 

  1. Brief about Sage One Investment Fund? What is your opinion on investments in the secondary equity and private market in India?

LC Sage One Select Stock Portfolio is an exclusive strategy created for clients of Lighthouse Canton India. It is based on Sage One’s flagship core and small/mid-cap portfolios that have delivered significant alpha over the last 12 years. The investment philosophy is based on focused concentrated investing in stocks with high structural growth, profitability, and quality management. The PMS has outperformed the benchmark BSE500 by over 7% annualized over a 5Yr period to deliver a CAGR of 17.3% PA as on 30th June 2022.

The private market ecosystem in India has shaped up very well over the last 5yrs, it is also evident from the fact that India has emerged as the 3rd largest such ecosystem globally in terms of the number of unicorns in years 21-22 and it recently crossed the 100 mark in terms of total unicorns. We have also seen global heavyweights in the private equity space more seriously and actively involved in India. Having said that the recent gloom surrounding the start-up space in India is a function of the global macro-economic & geopolitical environment which has affected most asset classes alike, we see it as a good opportunity to take long-term positions as there is much more sanity to the valuations of target companies today as compared to what it was 12 months back.

 

  1. How is the start-up ecosystem in India? What is the outlook? What is the strategy for LC Nueva for investing in India’s start-up ecosystem?

The private markets ecosystem in India has shaped up very well over the last 5yrs, but one needs to be cognizant of the fact that private markets are a relatively new asset class emerging in India as compared to public markets. UHNIs & Family offices have a growing interest and are exploring different ways of investing in private markets. We usually see a mix of direct cap-table transactions & also taking positions through AIFs. A recent trend amongst the said target segment is leaning more towards professionally managed funds. Also, we believe private markets are an asset class that requires a long-term view, and as an investor one also needs to understand that this is relatively a less liquid asset class to be in with a high risk and high return profile.

For LC Nueva we are sticking to our ethos of coming in early, typically pre-series A/ series A stage of business once they have started generating revenue. Also, while evaluating target companies, we stick to the fact that businesses we invest in, are not cash guzzlers and their survival does not depend on a constant need to raise capital. We are also very cognizant of the valuations we invest at and are ok to pass on an investment opportunity if we feel that the valuations being asked for are not justifiable. Proof that our strategy is working well is reflective in the fact that out of 25 portfolio companies for LC Nueva, 7 have already seen a valuation upgrade and have raised fresh capital at higher valuations in the short span that we have been invested in, which on an average is 7-9 months only.

 

  1. Can start-ups explore any other instruments to meet short-term funding/working capital requirements? What is LC India’s plan for this space?

Start-ups globally have been relying on Venture Debt as an alternate source of capital. The concept is catching up fast in India as well and is emerging as a serious space for fundraising by start-ups. 2020 was a breakout year for venture debt in India when the total venture debt funds raised jumped 2x to c.US$400m. The estimated venture debt market opportunity in India is US$3-4b based on the current VC funding rate. Venture debt also helps the founders fetch a better valuation for their businesses in equity fundraisers by helping them to grow their business and go in for equity rounds with better key business metrics.

While working with our portfolio companies and speaking to the investors in the sector, we have seen much interest in such a strategy. However, India and Asia’s venture debt market is still in its infancy, and venture debt facilities that can raise both local and overseas capital and provide opportunities for Indian companies to expand regionally are limited. Leveraging our global network and expertise, we are looking to launch a venture debt fund very soon. This is currently in the final stages of SEBI approval and we are looking forward to adding this strategy to our offerings.

Lighthouse Canton India is uniquely empowering start-ups and these strategies and just part of the Lighthouse Canton Founders’ Ecosystem initiative. Through the Founders’ Ecosystem, we work closely with both investors and founders, and we are committed to helping these companies and their founders enhance performance and plan for their personal and business legacies.

 

  1. What are the emerging investment opportunities globally for UHNI investors? How can you serve these requirements?

In today’s world of UHNIs & their families, they are more global citizens than they ever were in the past. Owing to this phenomenon the UHNIs also want their wealth and finances to have a global color rather than being concentrated in geography or a specific asset class. Clients today are looking for solutions that can provide them access to different geographies, asset classes, and fund managers to manage their wealth in a seamless, compliant and efficient manner.

Lighthouse Canton is appropriately positioned to cater to these needs and through our presence in Singapore, Dubai & India, the global financial hubs; we have the infrastructure to help our clients achieve their financial objectives. We work very closely with these clients, understand their objectives, and handhold them throughout the journey of structuring customized investment vehicles, taking country-specific regulatory approvals, and managing their wealth in line with their investment mandates including legacy planning.

 

  1. How are you leveraging technology for portfolio management and tracking?

Like most businesses we also appreciate the role technology plays in shaping businesses. All businesses are now technology companies at large. Globally only the adoption of technology expedited multi-fold with the onset of the dreaded pandemic and this transformation now has now ensured that we also stay abreast with the latest technology advancements. Technology is now a key part of our business DNA.

We believe in providing our clients with a robust and institutional-level service offering. To provide that, we leverage learnings and frameworks from our global offices. When we launched in India, it was already the norm in our Singapore and Dubai offices to provide digital statements and portfolio management and hence we provide the same level of service to our India-based clients. As a group, Lighthouse Canton believes in providing intelligent and optimized client experiences beyond portfolio management and tracking, and we have been actively developing the technology and tools to do so.

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