TVS Capital sharpens manufacturing focus, to write bigger cheques as exit avenues widen

Growth-stage private equity firm TVS Capital Funds is sharpening its investment thesis around manufacturing, betting on India’s evolving industrial ecosystem while increasing cheque sizes as it looks to back fewer but larger companies.

“We are now looking at building experience and capability in manufacturing,” Krishna Ramachandran, Managing Partner, TVS Capital Funds, told businessline.

“In manufacturing, we don’t look at everything. We are looking at very limited areas—precision manufacturing, components, electronic components for space and defence, smart meters, grid modernisation, specialty vehicles and other tech-driven manufacturing,. he added.

The firm, which is deploying its fourth fund with a target corpus of ₹4,000 crore and expects to reach nearly ₹5,000 crore including co-investments, has already deployed about ₹1,000 crore and plans to invest the balance over the next few years.

Ramachandran said TVS Capital has spent the past two years building expertise in enterprise technology and is now replicating the same approach for manufacturing by creating sector-specific capabilities and advisory networks before deploying capital.

The manufacturing strategy is centred on sectors benefiting from government support, including defence, space technologies and electronics manufacturing, where policy initiatives and production-linked incentives have created new opportunities.

“The VC industry will provide seed capital. When these companies want to scale and build governance, they need funds like us to bring in growth capital and capability,” he said.

Alongside the sectoral shift, TVS Capital is significantly increasing its investment size.

“Our cheque size has increased from Fund III to Fund IV. You can assume cheque sizes of ₹300-400 crore, with an average of about ₹350 crore. We will do between two and three investments every year,” Ramachandran said.

The larger cheque sizes reflect the firm’s strategy of backing growth-stage companies that require substantial capital to expand rather than making a higher number of smaller investments.

Ramachandran also said the exit environment for private equity investors has improved materially over the past two years, driven by regulatory changes and the emergence of secondary buyers.

“We have done about 37 investments so far and 27 exits, of which 14 have been through IPOs,” he said. “The secondary options have opened up. We are actively looking at secondaries for our exit,” he added.

He attributed the changing landscape partly to tax changes that have made secondary transactions more attractive, while noting that IPOs are increasingly becoming a mainstream exit route for Indian start-ups and growth companies.

According to Ramachandran, investors are now evaluating exits based not just on valuation but also on internal rate of return (IRR), recycling capital into newer opportunities while balancing public market conditions with long-term value creation.