49961 - Alkemi Fund II

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Summary of Investment Information

Project Number

49961

Company Name

Alkemi Growth Capital LLP

Date SPI Disclosed

Sep 10, 2024

Country

India

Region

South Asia

Projected Board Date

Oct 9, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jan 29, 2025

Department

Equity Portfolio Management

Industry

Funds

Previous Events

Approved : Nov 18, 2024
Signed : Nov 27, 2024
Invested : Jan 27, 2025

Sector

Venture Capital Fund

Project Description

IFC is considering an equity investment of up to US$10 million in Alkemi Venture Fund II – Scheme I (“Alkemi II” or the “Fund”), an India domiciled, early-stage venture capital fund exclusively focused on healthcare.

Associated Advisory Engagement

There are no advisory engagements with the Fund.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	15.0

Development Impact

Preliminary Project Outcome assessment of: Strong-Very Strong. i). Stakeholders: Increased access to venture capital and value creation for health sector investees in India. The Fund will focus on investing in startups operating in healthtech (70%) and consumer wellness (30%) with a focus on healthtech delivery, diagnostics, med-tech, pharma, and prevention/wellness. Despite a rapidly growing demand for healthcare services in India, healthtech and Biotech, Medical Devices, and Diagnostics sectors represented only 5% and 1% of VC capital invested between 2019 and 2023 respectively If successful, IFC expects the Fund Manager to be able to address a clear financing gap for healthcare startups in the country. ii). Stakeholders: Increased access to services to customers/patient health outcomes: India has strong unmet demand for quality healthcare. Following the strategy of its previous fund, Fund II will invest in companies that deliver better access to quality healthcare services in India, with an option to invest 25% of capital outside India. Health outcomes will only be relevant when delivered in applicable industry verticals and/or emerging markets. Higher scores may be possible if the Fund Manager (i) limits its exposure to developed markets; or (ii) commits on a best-efforts basis to invest in female founded companies, targeting 25% with a female co-founder. 2. Preliminary Market Creation assessment of: Moderate-Strong. i). Competitiveness: Increasing competitiveness in India's VC investment in health. Despite an active VC market in India, less than 10% of the number of VC deals completed in India were focused on healthcare. By supporting Alkemi to scale, the Fund will help demonstrate viability of financing healthcare via the VC business model. IFC expects the fund's success will encourage other fund managers to raise funds with dedicated strategies to address healthcare challenges.

I). IFC's own account equity: IFC's support with US$10 million of its own equity will help the Fund achieve its target size of US$75 million. While declining by 49% year-on-year to US$2.9bn, India recorded the second highest VC fundraising volumes in emerging markets after China in 2023. With an average of US$3.2bn fundraised capital between 2019 and 2023, the country is considered one of the most attractive VC ecosystems in emerging markets. However, a dedicated Health sector strategy is still relatively unique in the region and as a second-time fund manager with a significant larger size, the fund manager is expected to face unique sector-specific fundraising challenges and a higher risk perception. The fund has raised $49.7 million (66 percent of the target) at first close but requires support from IFC to achieve its final close, particularly given Fund II is targeting around 2x the size of the previous fund. In addition, a co-investment envelope of US$10 million may be considered as part of this proposal. ii). Non-Financial Additionality: i). Non-commercial risk mitigation: IFC's participation in Fund II will demonstrate IFC's confidence in the Fund Manager, sending a positive signal to the market. While Alkemi had originally approached IFC for its first fund in 2019, IFC passed due to envelope limitations and the fact that Alkemi was a first-time fund manager at the time. IFC entry at this stage will provide a signal of confidence which is particularly relevant given the general risk perceptions of investments in the healthcare sector and the relatively limited experience of the Fund Manager. ii). Standard setting: IFC will help the fund manager to implement an improved Environmental and Social Management System (ESMS) in line with IFC's Environmental & Social standards, in turn improving standards at the investee level. In addition, the team is seeking to explore potential additionality around gender lens investing.

E&S Category Rationale / Risks and Mitigation

The Fund will invest in pre-Series A, and Series A stage companies in the healthtech and wellness sector (healthcare delivery, diagnostics, med-tech, insure-tech, healthcare SaaS, pharma supply chain etc.). The Fund will not invest in any coal-related activities or higher risk business activities that may include a) involuntary resettlement, b) risk of adverse impacts on indigenous peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage, d) risk of significant retrenchment or e) significant occupational health and safety risks. The main E&S risks and impacts of this Project derive from activities of Fund’s investee companies and their E&S capacity and systems in place to manage these risks as well as the fund manager’s capacity to adequately assess E&S risks, require corrective actions where needed, and monitor their implementation. Overall, E&S risks of the proposed project are medium-low, and the project has been classified as a Category FI-2 project according to IFC Sustainability Policy. The applicable Environmental & Social (E&S) requirements for this project will include the Exclusion List, the host country laws and regulations, and the IFC's Performance Standards (when applicable).

In accordance with IFC's Access to Information Policy, IFC will periodically disclose the names, locations and sectors of sub-projects that have been supported by IFC investments through private equity funds, subject to regulatory constraints and market sensitivities. The sub-project(s) listed below reflect(s) the status of the portfolio as of January 1, 2025.

Investee	Country Of Investment	Sector
Datar Cancer Genetics	India	S-AB- Medical and Diagnostic Services
Jobizo	India	S-AC- Other Health Services
Medulance	India	S-AC- Other Health Services
Quick Clean	India	X-XY- Other
Saveo Healthtech	India	Q-AB- Pharmaceuticals and Medicine Wholesalers
Wholsum Foods	India	F-AI- Other Food

The Fund Manager will develop and implement an E&S policy and an E&S Management System (ESMS). The Fund Manager will also appoint an E&S officer responsible for implementation of the ESMS. The ESMS will include guiding principles for E&S due diligence, risk categorization and guidance on exclusion of high-risk business activities, corrective action plan, investment conditions, monitoring, and reporting. The ESMS will be benchmarked to the 2012 IFC Performance Standards and will include an external communications mechanism (ECM). The Fund will be required to report on its E&S performance to IFC on an annual basis. IFC will review the Fund’s E&S due diligence for the first three investments after IFC’s commitment, and all pre-existing investments prior to pro-rata contribution.

S.no	Title	Anticipated Completion Date
1	Appoint E&S Officer	10/15/2024
2	Establish ESMS	10/15/2024
3	Staff training	11/30/2024

Contacts

For Inquiries About the Project, Contact

Alkemi Growth Capital LLP
Alka Goel
Managing Partner
+91 11 2614 3600
sayhello@alkemivp.com
90/12, Malviya Nagar, New Delhi 110017, India
https://www.alkemivp.com/

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Indicator	Units	Comments
Level of aggregated successive funding raised from third parties	US$ million
Average annual compounded growth rate of investees in terms of patients reached/product produced	%
Number of VC funds with a dedicated healthcare strategy raised in India	#

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