India's Alteria Capital Advisors is in talks with investors to raise up to 35 billion rupees ($438 million) for its third debt fund, according to internal documents reviewed by Reuters.

The discussions, which come less than a year after Alteria raised 18.2 billion rupees for its second fund, underscore the huge interest in venture debt as Indian startups continue to raise billions of dollars despite economic headwinds.

Alteria is aiming to raise up to 20 billion rupees, including overallotment, for its primary venture debt fund that will be part of a dual-fund structure, according to its pitch deck seen by Reuters.

The second fund, dubbed "Scheme 2", will have a corpus of up to 15 billion rupees, including overallotment. The secondary pool of money will be used to provide working capital to startups.

Kotak Mahindra Bank's wealth management division, which backed Alteria's second fund, and IIFL Wealth Management are in late stages of evaluating investments in the latest fund, according to a source directly involved in the discussions.
Alteria and Kotak Wealth did not respond to Reuters' requests for comment. IIFL Wealth declined to comment.

Over the last few years, hundreds of startups have raised venture debt, which has emerged as an attractive investment asset class for large investors. Venture debt allows founders to raise capital without paring stakes, as is the case in equity financing.

This year, venture debt lenders Trifecta Capital and Stride Ventures raised 15 billion rupees and about 16 billion rupees, respectively. Alteria, counted among the top three venture debt firms in India, boasts of 28 billion rupees in assets under management and a portfolio that includes at least eight startups valued at $1 billion or above. The Mumbai-based firm was started by former executives of Temasek-backed InnoVen Capital in 2017.