Edelweiss Discovery Fund II

AIF - Private Equity

Private Equity

Private Equity Funds

Diversified

India Early Stage - Private Equity

Equity

Aggressive Growth

Investor Profile

1 - 7 YearsInvestment Horizon

HNITarget Segments

Structured as a Category II AIF, regulated by SEBI under the SEBI (Alternative Investment Funds) Regulations, 2012.Regulatory Fit

A Category II Fund of Funds providing exposure to mid-stage Indian private equity, targeting established, high-growth businesses across consumer, manufacturing and technology-enabled B2B sectors.

What This Strategy Does

Suitable for investors with an approximately 8–10-year investment horizon who can accommodate staged capital calls and restricted liquidity. The underlying strategy targets mid-stage companies with ₹150–600 crore in revenue and strong unit economics, with the objective of realising value through IPOs, strategic sales or secondary exits.

Role in a Diversified Portfolio

Within a comprehensive private wealth architecture, the fund functions as a high-alpha private market compounder, ideally allocated between 5% and 15% within an investor’s alternative assets or long-term illiquid growth bucket. It is designed specifically for High-Net-Worth Individuals, Family Offices, and institutional accounts seeking non-public market returns that are largely uncorrelated with everyday stock market fluctuations and short-term liquidity noise. Holding this strategy introduces a structural performance kicker to an equity portfolio. While listed equity allocations depend on prevailing secondary market multiples and headline macroeconomic sentiment, private equity returns in this mid-stage sweet spot are generated predominantly through direct operational expansion, revenue compounding, and operational margin expansion. This provides true fundamental diversification, allowing patient private capital to compound alongside the private wealth creation of India’s most successful unlisted entrepreneurs.

CW Expert Research Notes

Portfolio Diversification and Long-Term Potential

Edelweiss Discovery Fund 2 can serve as a complementary allocation within a diversified investment portfolio by providing exposure to select equity opportunities beyond conventional large-cap investments. Its potential lies in identifying businesses with scope for earnings growth and value creation over time. Investors should consider the fund’s risk profile, portfolio concentration and investment horizon before investing.

The Mid-Stage Growth Corridor Arbitrage

The Indian private equity spectrum exhibits a significant funding void between early-stage venture capital and late-stage pre-IPO buyouts. Early-stage venture funds take substantial technology and survival risks on companies with revenue below ten crore rupees, while mega-scale private equity funds require check sizes exceeding five hundred crore rupees, forcing them into mature, lower-growth enterprises at elevated multiples. Edelweiss Discovery Fund captures the highly profitable middle corridor between fifty and five hundred crore rupees of revenue, acquiring stakes at attractive entry valuations from founders who require strategic institutional mentorship rather than just passive financial checks.

The Multiple-Expansion Exit Engine

A decisive advantage of mid-stage private equity investing is the structural multiple expansion achieved upon exit. The fund acquires minority positions based on conservative private market valuation multiples, typically linked to fundamental cash flows or reasonable revenue multiples. Over the three-to-four-year holding period, as the company achieves institutional scale, professionalizes its governance, and prepares for a secondary sale to a global buyout sponsor or a domestic Initial Public Offering, the market re-prices the business at the significantly higher valuation multiples commanded by liquid public peers. This transition from private entry multiple to premium public listing multiple creates an exceptional return multiplier on invested capital.

Performance and Risk Analysis

Historical returns, volatility patterns, and how this fund has performed relative to its benchmark.

Benchmark Performance Comparison

Edelweiss Discovery Fund II

Nifty 50

Given the product’s limited performance history, the assessment considers the fund house’s track record and the historical performance of comparable strategies managed by the same fund house, which follow similar investment approaches. Such comparisons provide historical context only and do not represent the performance of the new product or indicate its future returns.

Detailed Risks

Market & Economic Risk

The fund is exposed to economic cycles, fluctuations in consumer demand, inflation, interest rates, and broader equity market conditions. Economic slowdowns may affect revenue growth, profitability, and valuations of portfolio companies. Adverse market conditions can also delay exits or reduce the valuations achievable through IPOs and strategic sales.

Liquidity & Exit Risk

Investments are primarily in privately held, unlisted companies with limited secondary-market liquidity. The closed-ended structure restricts investors' ability to withdraw capital before the fund's scheduled maturity. Returns depend significantly on successful exits through IPOs, strategic acquisitions, or secondary transactions, which may be delayed or completed at unfavourable valuations.

Disclaimer: Investments in Alternative Investment Funds (AIFs) are complex and involve a high degree of risk. They are strictly offered via private placement and there is no assurance of returns or capital protection. Further, subscriptions to AIF funds are restricted exclusively to eligible high-net-worth individuals, institutions, or accredited investors meeting the statutory threshold. Prospective investors should review the Private Placement Memorandum (PPM) and consult their financial advisors before making an investment decision. In the case of Category III AIFs, in funds utilizing leverage there may be an increase in the volatility of returns.

Strategy Details

A closer look at the investment thesis, portfolio construction, and current holdings.

Core Investment Theme

The core investment theme capitalizes on the structural formalization, digital enablement, and domestic manufacturing acceleration of the Indian economy. Thousands of dynamic mid-market enterprises are capturing market share from unorganized operators across regional consumption, precision component fabrication, domestic supply-chain software, and specialized clinical healthcare services. By providing these proven founders with growth equity, institutional governance systems, and strategic acquisition guidance, the fund helps transform regional champions into national category leaders. The investment team targets companies that exhibit high return on capital employed, strong pricing power relative to raw input costs, and proprietary technological or operational advantages that prevent easy replication by new entrants.

Broader Market View

Why This Strategy is Attractive Now

India’s domestic capital markets and mergers-and-acquisitions ecosystems have reached historic levels of liquidity and structural depth. Domestic institutional investors and retail mutual fund flows have established a robust, domestic appetite for mid-market IPOs, allowing high-quality private companies to list domestically without relying exclusively on foreign institutional liquidity. Concurrently, global private equity sponsors are sitting on record dry powder dedicated to India, creating an aggressive secondary buyout market for well-governed, mid-stage platform companies.

Market Outlook

India’s economic outlook remains supported by domestic consumption, infrastructure development, urbanisation, and long-term investment activity. While global uncertainties, inflationary pressures, and evolving interest-rate conditions may contribute to near-term volatility, underlying economic fundamentals remain supportive of long-term growth. A selective approach focused on valuations, asset quality, and sustainable returns remains important across market cycles.

Investment Style & Process

Investment Style

The fund operates a private-equity stewardship model that integrates rigorous forensic due diligence with hands-on post-investment operational value creation under the institutional governance of Edelweiss Alternative Asset Advisors, one of India’s largest private asset managers. The investment process begins with proprietary, founder-direct deal sourcing that bypasses competitive investment banking auctions, ensuring favorable bilateral deal terms and protective governance provisions. The diligence team conducts exhaustive forensic accounting audits, background integrity checks on promoters, customer reference calls, and ESG assessments. Following investment, the manager deploys dedicated operating partners to assist company leadership in establishing independent audit committees, streamlining inventory management, institutionalizing key managerial talent, and optimizing corporate tax structures to prepare the business for an institutional exit.

Why It Makes Sense

Discovery Fund II focuses on companies that have already demonstrated product-market fit and operating traction, seeking growth without assuming the earliest-stage venture risks. Discovery Fund II A provides exposure to this approach through an underlying-fund structure, with active governance and portfolio support aimed at improving exit readiness.

Top Stock Holdings

CompanySectorAllocation

Renee CosmetiicsConsumer Discretionary—

GivaConsumer Discretionary—

RentomojoConsumer Discretionary—

ProcMartConsumer Discretionary—

ArborealPharma & Healthcare—

Fund House Management

The asset management company’s track record, AUM scale, and fund manager credentials.

Fund Manager Track Record

Ashish Agarwal

Lead Portfolio Manager

Mr. Ashish Agarwal has 22 years of experience in investing and operations across multiple sectors and geographies. Before joining Edelweiss, he co-led India investments at Navis Capital Partners for 15 years, managing over USD 5 billion in AUM. Ashish has made investments worth over USD 300 million worldwide achieving remarkable returns. He has served on the boards of several companies, contributing to strategy, key hires, follow-on investments, and exits. Ashish holds an MBA from INSEAD, an MS in Computer Science from the University of Illinois, and a BE in Computer Science from the University of Mumbai.

Manager's Investment Philosophy

Ashish's approach centers on operationally-driven, long-term value creation — improving business fundamentals (talent, execution, strategy) rather than relying on financial engineering, sustained through deep, patient partnerships with portfolio companies. He uses active board governance as a core lever, shaping key hires, strategy, and follow-on capital decisions, while applying disciplined, selective capital allocation across sectors and geographies based on transferable operational playbooks. Critically, he plans for exits from day one, ensuring full lifecycle ownership of an investment — all anchored in a risk-aware pursuit of returns, prioritizing business quality and downside protection to generate sustainable, outsized outcomes.

Amit Agarwal

Co-Portfolio Manager

He has been associated with our Company since April 1, 2017. He is responsible for managing the entire lifecycle of investment and creating exit strategies in several assets under Private Credit business vertical and has also been instrumental in fund raising efforts for funds in our Company. He has completed his bachelor’s degree in commerce from the University of Lucknow.

CW Expert Take

EAAA Alternatives brings an established private-equity investment platform, supported by structured due diligence, active portfolio management and exit-focused execution. Discovery Fund II A offers exposure to its mid-stage growth strategy through an underlying fund structure. While the predecessor fund demonstrates relevant investment experience, outcomes remain dependent on company performance, valuations and successful exits.

Firm Overview

AMCEdelweiss Asset Management Limited

Founded2007

Total AUM₹95,300 Cr

AMC Description :

Subsidiary of Edelweiss Financial Services Ltd. Primarily the AMC of Edelweiss Mutual Fund; also manages two AIF trusts (Cat II and Cat III) and PMS strategies, both small in size.

Investment Philosophy & Approach

High-Level Investment Process

Origination combines proprietary thematic research, company screening and investment-network sourcing. Potential investments undergo commercial, financial, forensic, legal and governance diligence, followed by Investment Committee approval. Post-investment, the manager supports strategy, leadership, acquisitions and governance, with exits pursued through IPOs or strategic transactions.

Operational & Regulatory Details

What it costs to invest, transaction mechanics, and regulatory disclosures you should know.

Costs and Fees

Annual Management Fee2%

Performance Fee20%

Regulatory & Tax Information

AIFEDF30

ISIN

MonthlyDealing Frequency

Nifty 50Benchmark

STCG | <12 Months 20%

LTCG | >>12 Months 12.5% on gain above 1.25 Lakh

Tax Implications (India)