Dear Partners,
In December, I wrote to you that my search clock had formally started. At the end of our Q1, this is the first of what will be a quarterly rhythm of operating updates.
The headline: deal flow has been strong, and we have maintained discipline on both quality and price. We have evaluated 64 live deal situations mostly focused on B2B services and technology platforms, ranging from ~₹50cr (~$5M) to ~₹350cr (~$38M) in enterprise value. We are actively pursuing 9 of these, including one where we have submitted a non-binding offer.
The SME M&A landscape is busy but unevenly priced. Founders in their 50s and 60s are increasingly open to the idea of a transition - the succession gap thesis is validated. But open to the idea and ready to transact at a sensible valuation remain two different things. Seller expectations are shaped by PE/VC and public market benchmarks - multiples that reflect larger and more mature companies entirely. Resetting these expectations is as much about negotiation as it is about building trust over time.
My hypothesis is that for the Indian SME seller, we must build rapport and trust over a longer period of time to shift the conversation beyond just valuation. Fortunately, I have witnessed several sellers articulating priorities beyond price - long-term legacy, values, protection of employees and customers - which I believe we can demonstrate alignment on with sustained engagement. My goal is to be the first call when a founder is ready to have a serious conversation - and that moment often comes after 6-12 months of the seller engaging with buyers and learning from the market.
Meanwhile, the rapidly evolving AI landscape is reshaping both what we look for and how we operate. On the investment side, we are stress-testing every target's business model against an AI disruption timeline and prioritizing businesses that are inherently AI-resilient - those with strong vertical expertise, deeply embedded in customer workflows or data flows, and pricing on outcomes rather than headcount. On the operations side, we brought on our first full-time team member - Manav Chaudhry - and have built a proprietary technology stack that lets our two-person team cover more ground than would have been possible with five people twelve months ago. More on both below.
What follows is a full account of where we are: the market, our pipeline, our sourcing infrastructure, our sector convictions, and where we are headed in Q2. Thank you for your trust and patience. I believe that this is a search that will reward discipline, patience, and relationships, and I intend to run it that way.
Regards,
Bhavik Rasyara
Managing Partner, Pravah Capital
64 deals evaluated | 9 in active pursuit | 1 non-binding offer submitted
9 deals currently in active pursuit across various funnel stages.
We also initiated proprietary outreach to 11 founder-led companies directly. We expect to scale this channel in Q2.
Spend breakdown:
FX impact: ~$3,000 (INR depreciation on India-held capital, INR 88 to 93 per dollar). Not an operating expense.
Every deal situation we have evaluated since inception, grouped by sector.
Selectively interesting, not blanket conviction. This sector is large, fragmented, and has real succession dynamics - but also faces the most direct AI disruption risk. We are filtering hard: only pursuing companies with managed ODC models, deep client embeddedness, or proprietary vertical expertise. Avoiding pure T&M staffing, which we view as structurally exposed.
Examples: semiconductor chip design, digital engineering, managed offshore development.
High-quality assets, valuation-constrained. Recurring revenue, embedded workflows, blue-chip clients. Sellers anchor to SaaS multiples (12-15x) that don't work at sub-25% growth. Patience required.
Examples: dealer management SaaS, broker trading infrastructure, B2B hotel distribution platforms.
High-conviction thesis. Compliance-driven, non-discretionary demand (FSSAI, USFDA, CPCB). Accreditation moat (NABL + ISO 17025). 25-40% EBITDA structurally achievable. Proven PE/strategic exit path - Eurofins, SGS, Bureau Veritas all acquiring Indian labs.
Pharma, food safety, environmental testing - regulatory compliance infrastructure.
Broad category, selective within. Looking for domain specialization + regulatory moat, not generic labor arbitrage. AI disruption is a live underwriting question. One industrial services target with 49% EBITDA is challenging our asset-light orthodoxy - exploring whether machinery sourcing moats can justify capital-intensive models.
Examples: offshore mortgage servicing, warehouse equipment operations, debt collections.
Regulatory tailwind, buy-and-build potential. DPDP Act and CERT-In mandates creating non-discretionary spend. Hyper-fragmented (no player >5% share). Looking for ₹50-100cr (~$5-11M) platform to anchor a roll-up.
Managed SOC, compliance auditing, VAPT services - regulatory-driven annual spend.
Outside core mandate. Paints, chemicals, precision machining, elevators, foundries, injection moulding. Reflects India's advisory ecosystem skewing toward manufacturing. Our outreach is shifting advisor flow toward services and tech.
EdTech (B2B), CPaaS, AI consulting, staffing - evaluated but below threshold on size, margins, or mandate fit.
Total: 64 evaluated, 12 progressed (~19% qualification rate). Source mix: ~85% advisor-referred, ~15% proprietary outreach.
A sample of the types of companies we are evaluating.
Globally scarce skill set. AI augments rather than replaces physical design workflows.
Valuation gap. We will not proceed without clear succession intent or pricing alignment.
Compliance-driven demand. Accreditation moat (2-3yr barrier). Proven PE/strategic exit path.
Scarcity of scaled assets. M&A competition from strategics (Eurofins, SGS, Bureau Veritas).
Deeply embedded in OEM workflows. Blue-chip clients. 25yr track record, bootstrapped.
Winding down one-off revenues and re-investing in AI products. Temporary drop in growth and margins - bounce-back to be proven.
SEBI regulation creating mandatory broker tech upgrade cycle. Mission-critical, high switching costs.
1 year of deceleration without valuation recalibration. Competitive process.
Exceptional margins from secondhand machinery sourcing arbitrage. Pan-India ops, blue-chip clients.
Potentially working capital intensive. Moat in machinery sourcing and financing to be proven.
$48.5B US market with structural demand floor. 40-70% offshore cost advantage.
AI disruption risk: 65-80% of routine tasks automatable. 100% US client concentration.
A significant part of Q1 was building the sourcing engine from scratch - activating a nationwide network of investment banks, M&A boutiques, CA firms, and sector specialists who can surface the kinds of deals we want to see. This is now operational and producing results.
Network. 120+ advisory firms in our CRM and continuing to expand. 31 are actively sharing deal flow. New relationships are producing actionable opportunities within weeks of first contact.
Team. Manav Chaudhry joined as our first full-time associate during Q1. The team is now two people - small by design. Our July 2025 plan envisioned starting with interns; instead, the volume and complexity of deal flow warranted a direct full-time hire.
Technology. We have built a proprietary technology stack that integrates our CRM, deal screening, sector research, contact enrichment, and outreach into a single operating system. Research that would take a team of analysts 2-3 days is completed in hours. Sector primers are produced systematically, not ad hoc. AI has changed the profile of talent we need next - from routine research to judgment and relationship-driven roles.
This infrastructure compounds. Every sector primer feeds future deal screening. Every advisor interaction is logged and tracked. Every deal evaluation builds pattern recognition across our dataset. What feels like overhead in quarter one becomes a significant edge by quarter four.
Even a short email with a name is helpful - I will handle the outreach from there.
You will hear from me at the end of each quarter. In the next update, I will report against the Q2 priorities listed above - what we said we would do, and what actually happened. If there are material developments between updates, I will reach out directly.
I am always happy to jump on a one-on-one call to go deeper on anything in this update. Just reply to this email and we will find a time.
Thank you for your partnership. The search is well underway.