LotusPool to launch $125-mn fund

LotusPool Capital Mauritius (LotusPool), founded by Subbarao Telidevara, founding member and former partner of Actis and Chandrasekar Kandasamy, former managing partner of ePlanet Capital, is set to launch a $125-million fund. The fund, LotusPool Fund I, will focus on small and medium enterprises (SMEs) in India.

According to sources, the International Finance Corporation (IFC) has proposed an equity investment of up to $15 million in the fund. The fund will close the entire $125 million by the middle of next year, sources added.

When contacted, Telidevara and Kandasamy refused to comment.

LotusPool Fund is a value-oriented, operationally-focused private equity fund targeting small- to mid-size businesses in southern India and emerging states with low private equity penetration such as Rajasthan, Madhya Pradesh, West Bengal.

The fund will focus on taking stakes in scalable SMEs that are at early-expansion phase of their growth cycle.

The enterprise values of the target firms will be between Rs 30 crore and Rs 250 crore (approximately $6 million and $50 million), according to LotusPool Capital’s website.

Industry experts say not many funds are operating in this space and the uniqueness about the fund is its region-spread. In 20 years, the SMEs portfolio has given two to two-and-a-half times returns.

The fund will be managed by LotusPool Capital Mauritius Limited (the investment manager) with LotusPool Capital Advisors Private will as investment advisor. The founders, Telidevara and Kandasamy, have more than 41 years of collective experience having invested in about 70 firms.

According to the project document, the focus of the fund’s investments will be for the benefit of companies and projects in less-developed geographies. The target firms will benefit from value-added practices including increased corporate governance, environmental and social standards and transparency.

“Small- and mid-size businesses often require revolving short-term debt, but have little access to such financing from banks. So we can provide short-term (three to 12 months) debt to our profitable portfolio companies with a strong cash flow,” says LotusPool Capital’s website. According to IFC, its focus on less-developed geographies will attract private capital to these areas. It said it would also mobilise commercial investors to LotusPool Fund I, contributing to a diversified fund raise.