IDFC Alternatives to raise $600 mn

Plans to raise $400 mn for its fourth PE fund and a $200-mn realty fund

IDFC Alternatives, leading multi-asset class investment manager, plans to raise $600 million from two funds, for which it will hit the road soon. The private equity (PE) arm of IDFC plans to raise $400 million from its fourth PE fund and $200-250 million from a real estate fund, which will invest in mid-market housing projects in six cities.

The PE fund will invest in sectors in which it has expertise - education, health care, food and agriculture, media and telecom.

"Both funds will be launched simultaneously, as we have separate teams," M K Sinha, managing partner and chief executive officer told Business Standard.

As IDFC Alternatives pushes for exits - it has had a couple and three or four are in the pipeline - to return capital to investors, its assets under management (AUM) will get reduced. Hence, it is planning to raise incremental capital.

Sinha is not perturbed that there are other funds trying to raise money. "There's appetite for India, and it is not yet dented," he says. India Value Fund, investors in Meru Cabs, plans to close a fund in three months, targeting to raise $700 million. "But investors are likely to be selective in terms of which fund managers they commit money to," says Sinha. The firm invests across three asset classes - PE, infrastructure equity and real estate - and has AUM of $2.7 billion. It had raised $1.8 billion from two infrastructure funds, deployed $1 billion, and has dry powder of $700 million.

Many firms such as SBI Macquarie raised infrastructure funds but IDFC Alternatives is the only fund manager to have raised a second fund, of $900 million, in difficult times; it raised money before the sentiment changed after Narendra Modi came to power.

In PE, it has raised three funds of $200 million, $450 million and $650 million and fully deployed these. In real estate, it has exited a $150 million office fund after it sold two office assets to Blackstone and made good returns.

It also has a $125-million debt fund in real estate and deployed nearly half of it. Since its inception in 2002, the alternative asset investment firm has managed seven India-dedicated funds across asset classes. IDFC Alternatives has so far invested Rs 5,700 crore across 41 investments and delivered 25 exits.

Some of its successful exits are reflected in the internal rate of return (IRR) of the firm's various funds. It raised Rs 840 crore ($192 million) for India Development Fund in 2004 and fully exited it at a net IRR of 32 per cent last year.

Last year, IDFC Alternatives did two fund-raising rounds, including $900 million in one of the single largest funds raised across investment themes in the recent past. The fund was fully subscribed and closed after hitting the upper end of the target in October 2014.

This included a commitment of about $90 million from parent IDFC, beside $810 million from outside investors, including those from North America, Europe and West Asia. IDFC Alternatives had raised $123 million under IDFC Real Estate Yield Fund, its maiden realty fund focused on residential real estate.