Circulate Capital to back rare earth, textile recycling plays in India

Mint. “There's been strong extended producer responsibility (EPR) regulations in place for over a decade and that has now evolved into mandatory recycled content regulations as well.”The firm announced a first close of $220 million for its second fund, which has a targeted corpus of $300 million.

Through the new fund, Circulate is looking to make 16-18 investments across South and Southeast Asia, of which half will go towards India and its neighbours, while the rest will go to companies in Indonesia, Thailand, Vietnam, the Philippines, and Malaysia.Conglomerates such as Coca-Cola Co, Danone, Dow, and Procter & Gamble have once again come in as limited partners in the second fund. This is in addition to development finance institutions like British International Investment, the French DFI Proparco, the International Finance Corporation (IFC), and Builders Vision, the family office of Lukas Walton, the grandson of Walmart founder Sam Walton.On an average, the firm invests between $15 million and $25 million in a company and picks up a minority stake in the range of 15-25%.The firm's second fund comes at a time when investors across the globe have pulled away from pouring money in companies catering to environmental as well climate-specific problem statements.

Much of this has to do with how such investments have failed to produce any healthy exits for investors or meaningful impact at scale.Nonetheless, for Circulate, policy tailwinds have been a major driver in its decision to keep writing cheques to companies in India. “Regulations started with plastics first, then into electronic waste, where a limited number of commodities were covered under EPR regulations.