Dovetail is preparing to enter the custody business, a move that would fill the most significant gap in its current suite of services for domestic and international investors operating in India.
The independent asset-servicing company expects to apply for a custody licence within the next 30 to 45 days. It already offers clearing, fund administration and platform solutions, and now wants to add the safekeeping and servicing of client assets to that list.
The plan is being backed by a ₹100 crore fundraise from a venture capital investor. Of the total amount, ₹70 crore has come into the company as fresh equity, while ₹30 crore was used to purchase a portion of the promoters’ holding.
Dovetail intends to use the fresh capital to meet regulatory requirements associated with the custody business, reinforce its balance sheet and fund expansion into additional financial centres.
Co-founder Dev Sampat said the company is preparing for the licence application while keeping possible changes in regulatory capital requirements in mind.
The present requirement stands at ₹50 crore, according to Sampat, although discussions are underway around raising it to ₹75 crore. The latest infusion, he said, gives Dovetail the financial room to prepare for either requirement.
Building a complete asset-servicing platform
Custody is a critical part of the institutional investment chain. A custodian holds financial assets on behalf of investors and supports functions such as settlement, record-keeping and asset servicing.
For Dovetail, entering this segment is less about launching a stand-alone business and more about completing its existing platform. The company wants investors to be able to access services ranging from fund establishment and compliance to clearing, administration and custody through a single provider.
That would place Dovetail in competition with established banking-led custodians, many of which already have long-standing relationships with institutional investors.
The company’s pitch is built around its independence from large banking groups and its focus on specialised market infrastructure and asset-servicing operations.
Dovetail was founded by former Kotak executives and has developed its business across clearing and fund administration. According to figures shared by the company, its clearing operations currently process between 15 lakh and 16 lakh trades each day. Average notional volumes in derivatives are estimated by the company at between $64 billion and $65 billion.
These numbers give Dovetail an existing operational base as it prepares to move into a business where scale, systems and regulatory controls play a central role.
Expansion beyond clearing
The company’s operations now extend beyond trade clearing.
Dovetail administers mutual funds operating from GIFT City and manages about 40 funds from Singapore. It has also received approval to offer third-party fund management solutions.
The next phase of expansion will focus on taking its administration business into more jurisdictions. Mauritius and the United Arab Emirates are among the markets being considered, alongside a deeper presence in Singapore and the Dubai International Financial Centre.
The strategy reflects Dovetail’s attempt to serve investment structures that operate across multiple financial centres while retaining exposure to India.
Rather than limiting its role to transactions executed within India, the company wants to support the broader operating chain used by international funds. That includes fund formation, compliance, administration, clearing and, subject to regulatory approval, custody.
Institutional capital brings more than funding
While the capital raise will help Dovetail meet financial and regulatory needs, the company also sees value in bringing an institutional investor onto its shareholding table.
Co-founder Mahesh Shekdar said the investment adds external validation as Dovetail enters new jurisdictions and seeks relationships with international clients and regulators.
Shekdar said the company is profitable and has a strong net worth, but believes institutional backing can strengthen market confidence during its next stage of growth.
That credibility will matter as the company applies for licences, establishes operations in new locations and attempts to compete with larger financial institutions.
Dovetail is also advised by a board led by former Securities and Exchange Board of India chairman M. Damodaran. The company believes this governance structure will support it as it prepares for regulatory scrutiny and a wider international presence.
The next test
The custody licence application will be the immediate test of Dovetail’s expansion strategy.
Securing approval would allow the company to bring together the different parts of its asset-servicing business and offer a broader proposition to funds and institutional investors seeking access to India.
The ₹100 crore fundraise provides the capital required to begin that process. The larger challenge will be turning an expanded service portfolio into a credible alternative in a custody market where regulatory trust, operational reliability and client confidence are essential.
For Dovetail, the opportunity now lies in converting its experience in clearing and fund administration into a fully integrated business serving investors across jurisdictions.
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