Dovetail Enters Custody Race to Capture India's Growth

Dovetail is poised to enter the custody business, completing its goal of offering a full-service platform for global investors accessing the Indian market. The firm plans to apply for a custody license within the next 30 to 45 days, anticipating substantial growth in asset servicing driven by rising investment flows into India.

Dovetail already provides clearing, fund administration, and platform solutions, viewing custody as the essential final component of its comprehensive offering. With India's market capitalization forecasted to reach $12 trillion in the next decade, the company identifies custodial services as a highly lucrative, volume-driven sector.

To fuel this strategic expansion, Dovetail has secured ₹100 crore from a venture capital fund. This capital infusion comprises ₹70 crore in fresh equity and ₹30 crore from a promoter stake sale. The funds are earmarked for meeting stringent regulatory capital requirements for the custody business, bolstering the company's balance sheet, and facilitating international market expansion.

The company, founded by former Kotak executives, operates independently from large banking groups. Its clearing division currently processes 15-16 lakh trades daily, handling average notional derivative volumes of $64-65 billion. Dovetail also administers mutual funds from GIFT City and manages approximately 40 funds based in Singapore.

Beyond its current operations, Dovetail intends to expand its fund administration business into new international jurisdictions, including Mauritius and the UAE, while reinforcing its presence in Singapore and Dubai's DIFC. This expansion strategy hinges on capturing foreign portfolio investment flows from key hubs like Mauritius and Singapore by offering robust, substance-based operations and compliance expertise.

Co-founder Mahesh Shekdar emphasized that the recent fundraise is crucial for enhancing the company's credibility as it grows globally. "We are profitable with a strong net worth, but institutional money brings validation and confidence as we enter more jurisdictions," he stated. Dovetail is guided by a board led by former SEBI chairman M. Damodaran, reinforcing its governance credentials ahead of regulatory approvals and its next growth phase.