Carnelian Private Growth & Innovation Fund

Carnelian Private Growth & Innovation Fund Snapshot

Growth-to-PIPE Investment Strategy and Fund Objective

The Carnelian Growth-to-PIPE Fund construct brings together investments across different stages of company development. Instead of relying exclusively on one type of private-market opportunity, the strategy combines growth equity, pre-IPO and PIPE investments to create multiple potential routes for value creation and liquidity.

Growth Stage

The growth-stage allocation is 50–60%. These investments target businesses where accelerated earnings growth, high ownership and board access can contribute to IRR and MOIC generation. The indicative holding period is 4–5 years.

Late Stage / Pre-IPO

The late-stage or pre-IPO allocation is 20–25%, with an indicative holding period of 6 months to 2 years. These investments seek PE-style returns from companies approaching the public markets, while providing the fund with potential access to ownership, board participation and listing-related value creation.

PIPE

PIPE investments account for an indicative 20–25% of the portfolio. PIPE, or Private Investment in Public Equity, focuses on opportunities created by market dislocations and discounted entry valuations. The indicative holding period is 2–3 years, with PIPE positioned as the strategy's DPI engine.

The overall strategy seeks to align each investment with the appropriate stage of a company's development while targeting capital appreciation, capital preservation and earlier DPI compared with a traditional single-stage fund. The fund's stated endeavour is to return invested capital from the fifth year onwards.

Portfolio Allocation Across Growth Equity, Pre-IPO and PIPE

This combination gives the portfolio exposure to companies at different points in their growth cycle. Growth investments are intended to drive long-term appreciation, while pre-IPO and PIPE investments can provide comparatively earlier potential liquidity pathways.

Sector Focus: Manufacturing, Healthcare, Consumption and Technology

The strategy focuses on India's high-growth and innovative businesses across four key sectors.

The strategy focuses on innovation-led businesses building differentiated products and technologies across structural growth sectors. It also retains flexibility to invest opportunistically across other sectors, including financials.

Investment Selection, CLEAR Due Diligence and Value Creation

The investment process starts with the entrepreneur. Carnelian looks for founders and management teams demonstrating passion, operating capability, scalability, strong governance, integrity, risk awareness and meaningful personal capital invested in the business.

The broader private-equity investment framework follows disciplined underwriting throughout the investment lifecycle:

• Disciplined entry: Avoiding fads and seeking reasonable valuations.
• Quality: Backing strong entrepreneurs and applying forensic analysis.
• Growth: Identifying accelerated growth and potential valuation re-rating.
• Risk approach: Combining underwriting, governance, portfolio construction and continuous monitoring.
• Disciplined exit: Pursuing value realisation through multiple liquidity pathways.

The MAGIC Framework

Carnelian applies its MAGIC framework to identify companies approaching a catalytic inflection point. The framework focuses on:

• Earnings growth of 20–25% from business performance
• Re-rating triggers contributing 5–10% through multiple expansion
• Unique business models
• Early identification of themes and companies
• Scarcity premiums where public-market comparables are limited
• Strengthening governance as family-owned companies institutionalise
• Structural shifts, macro tailwinds, new products, completed capex and R&D-backed differentiation

The central idea is to identify businesses where growth acceleration has yet to be fully priced by the market.

CLEAR Forensic Analysis

The proprietary CLEAR forensic framework evaluates five areas:

The framework is intended to identify potential accounting and governance risks before capital is committed.

Beyond Capital

Carnelian's value-enhancement approach extends beyond financing. It includes support around listing narratives, investor positioning, KPI tracking, capital efficiency, M&A, capital raising, expansion opportunities, management incentives, CXO talent and governance.

Portfolio Construction, Deal Size and Diversification

The fund targets 15–20 portfolio companies, balancing focused investment conviction with diversification. The indicative deal size is INR 100–250 crore, intended to provide enough capital for Carnelian to act as a meaningful partner while maintaining investment discipline.

The portfolio is intended to be diversified across four or more sectors to manage unsystematic risk. Co-investment opportunities are available to select investor classes and may enable larger positions in high-conviction investments.

Carnelian describes this as a structural whitespace in the market: the mid-sized PE segment, where funds typically compete for INR 100–500 crore opportunities and can combine negotiated entry valuations with IPO partnership capabilities.

Minimum Investment, Tenure, Drawdowns and Fees

The fund's capital deployment follows a commitment-based structure. Investors contribute 10% upfront, followed by subsequent drawdowns based on approved investment opportunities.

The commitment period is 36 months from first close, with a possible one-year extension. The fund tenure is 6 years 9 months after first close, with a possible two-year extension. Reinvestment is applicable at the investment manager's discretion.

Carnelian Fund Fees

Management fees are chargeable on the aggregate capital commitment. The fund has a 15% p.a. pre-tax hurdle rate, with a catch-up provision applicable.

The fund's commitment structure means investors should account for both the initial contribution and future capital calls during the commitment period. The specific mechanics of fees, distributions and other investor obligations are governed by the fund documentation.

Who Can Invest in the Carnelian Private Growth & Innovation Fund?

The fund is structured around a substantial capital commitment, staged drawdowns and a multi-year investment horizon. Investors should therefore have the capacity to meet subsequent capital calls as investments are approved during the commitment period.

The strategy invests in private, pre-IPO and listed opportunities, making liquidity, valuation and market conditions important considerations. The stated tenure is 6 years 9 months after first close, with a possible two-year extension.

Co-investment opportunities may also be available to select investor classes, allowing eligible investors to participate in larger positions in high-conviction deals.

Key Risks of the Carnelian Private Growth & Innovation Fund

Private-Market Illiquidity

Growth-stage and pre-IPO investments can take time to monetise. Although the strategy seeks multiple exit pathways and earlier DPI, actual liquidity depends on company performance, market conditions and transaction opportunities.

Valuation Risk

Private-company valuations can change as earnings, comparable-company valuations and market expectations move. A successful business does not automatically translate into a successful investment if entry or exit valuations change unfavourably.

Business Execution Risk

The strategy depends on portfolio companies delivering planned growth, strengthening operations and executing strategic initiatives. Factors such as customer concentration, balance-sheet risks and key-person dependence can affect outcomes.

Governance Risk

Governance quality is an important part of the investment framework. Carnelian uses CLEAR forensic analysis to examine related-party transactions, corporate structures, liabilities, earnings quality and other potential governance concerns.

IPO and Exit Risk

Pre-IPO investments can be influenced by listing timelines and public-market conditions. An IPO may be delayed or market conditions at the time of listing may differ from expectations.

PIPE and Market Risk

PIPE investments seek opportunities arising from market dislocations and discounted entry points. However, listed securities remain exposed to market volatility, liquidity conditions and changes in investor sentiment.

Capital-Call Risk

The 10% upfront contribution is followed by additional drawdowns as deals are approved. Investors need to maintain adequate liquidity to meet these future commitments.

Tenure Extension Risk

The fund has a stated tenure of 6 years 9 months after first close, extendable by two years. The commitment period can also be extended by one year.

Portfolio Risk

While the strategy targets 15–20 companies and diversification across four or more sectors, individual company performance can still influence overall fund returns.

Category II AIF Taxation and Investor Considerations

Category II AIFs are generally structured with pass-through taxation for eligible investment income, subject to applicable tax provisions and investor circumstances. Tax treatment can vary based on the nature of income, investor status and prevailing regulations.

Investors should review the applicable tax treatment before investing and consider the fund's formal documentation and current tax rules for the relevant financial year.

How ALTPORT Helps Investors Access Carnelian Private Growth & Innovation Fund

ALTPORT provides access to product information and fund documentation for the Carnelian Private Growth & Innovation Fund and coordinates the onboarding process with the relevant investment manager.

Investors can review the fund structure, strategy, terms, portfolio construction approach and associated risks before proceeding with the investment documentation. Investors can also compare this opportunity with other AIF investments and review the top AIF funds in India before making an allocation decision.