How ADM Capital’s bet on Square Yards fits into its India credit play

 How ADM Capital’s bet on Square Yards fits into its India credit play

Hong Kong-based credit investor ADM Capital has pumped $25 million (about Rs 185 crore) into property-technology company Square Yards, as it ramps up debt financing to digital businesses in India.

Square Yards said Friday the “growth financing” will help it invest in various business verticals. This capital infusion is the first tranche of the company’s plan to raise $100 million, it added.

The company, based in Delhi-NCR, joins several other Indian tech startups in securing debt funding in recent months. Most prominent among such companies is SoftBank-backed hospitality firm Oyo, which raised $660 million in debt, and ride-hailing unicorn Ola, which raised $100 million in bank loans for its electric vehicle arm.

ADM Capital manages assets worth $2.4 billion across three main verticals—private debt, food and agriculture, and climate finance. It entered India in 2004 and has since disbursed over $670 million across 18 transactions.

The firm has been ramping up its credit portfolio in India in recent years and even looking at distressed assets and non-performing loans.

In January, ADM said there was a funding gap for mid-sized companies in India even though the country had loosened its monetary policy and had attracted a large amount of foreign direct investments.

“In the current environment, demand for funding is largely among mid-sized companies seeking growth financing. ADM Capital has taken advantage of several opportunities that facilitate the refinance of existing lenders who are unable to renew or expand their loans, to fund the business growth of their investee companies,” it said.

The firm said its India pipeline also included companies that are performing well and have low levels of debt which seek to invest in capital expenditure or chase acquisition opportunities.

It added that it had also been disbursing loans to India’s new economy sectors, including digitally disruptive businesses with professional management teams and institutional private equity sponsors.

Besides, it looks for export-oriented companies or those with cross-border business, or access to international financing.

ADM also says it prefers opportunities in sectors with stable demand and lends to companies with annuity streams of cash flows.

The investment in Square Yards is in line with this thesis. Square Yards offers real estate search and discovery, transactions, mortgages, rentals, property management and post-sales services. It also caters to real estate agents, property developers, banks and other financial institutions.

Square Yards has so far raised $50 million in equity funding and an equal amount in debt since its inception in 2014. This includes the $20 million it raised in equity capital in 2019 from media house Times Group, Japan’s Genkai Capital and PropertyGuru founders Steve Melhuish and Jani Rautiainen, among others.

Earlier this month, Square Yards acquired AI-based 3D visualization platform PropVR. It had previously bought PropsAMC and Azuro.

The company posted a 17% increase in revenue for the year through March 2021 to Rs 348.8 crore from Rs 298.2 crore in 2019-20. While Indian real estate operations accounted for half of its revenue, 41% came from international business and the remaining from mortgage business.

The company recorded its sixth consecutive profitable quarter in the January-March period and posted earnings before interest, tax, depreciation and amortization of Rs 50 crore.

Sumit Upadhyaya

The Capital Quest