Fund focus: UC Capital looks to play matchmaker

For Varun Sood, founder of Capvent India Advisors and co-founder of UC Capital, it was hard to watch. Representatives from European manufacturing firms would visit India looking to take advantage of the country's cheaper labor and growing consumer base - only to find themselves lost in an unfamiliar business environment, unable to establish a local base or find suitable partners.

"We basically said, look, as long as you're tourists coming in for two days, and you don't know the difference between the top end and bottom end, you're never going to do business here," says Sood. "You need to become properly local."

UC Capital's newly launched Lions Growth Fund is meant to give those companies access to the connections and the capital they cannot form on their own. The fund, with a corpus of EUR150 million ($171 million), will invest in European companies and provide them with assistance in accessing India and other Asian markets.

Lions' strategy is intended to take advantage of two ongoing trends. The first is the wave of deindustrialization in many of Europe's traditional manufacturing centers in France, Spain, southern Germany and northern Italy. Facing reduced domestic demand in their home countries, industrial companies have begun to seek opportunities farther afield.

The other trend is growing interest among India-based manufacturers in working with established brands from other regions. This was difficult to achieve, however, since the manufacturers often would have to dislodge the brands' established suppliers first, and then had difficulty collaborating with their far-off counterparts.

UC Capital plans to invest in 10-12 companies, committing EUR4-20 million in each deal. The firm has a very specific view of the type of companies it wants to pursue. "They're European, they have very good management, with many years of experience," says Sood. "They have very high growth margins, which means they have good supplier relationships. And they are in difficulty, so we get them at a reasonable price."

Once UC Capital has made its investment - the firm only seeks control deals - it will target stabilization at home and the pursuit of partnerships and business opportunities in India. Ultimately it wants to move operations entirely, transforming the European firms into Indian players.

The fund has already made two investments: a manufacturer of store installations for major retailers, and a maker of dashboard components for high-end automotive companies such as Mercedes and Porsche. Though the firm's only targets companies based in Europe, it maintains a separate team in India to help find local collaborators.

Building up the capabilities of India's local manufacturing sector through creating access to experienced partners is another goal of UC Lions. "A lot of the local manufacturers are very good, but besides the two or three top companies, they have not really invested in the future; they're just basically contract manufacturers," says Sood.

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• Topics
• Fundraising
• South Asia
• Industrials
• Europe
• India
• Capvent
• manufacturing