Tata Capital sets the ball rolling on follow-on fundraising

Growth Fund may raise $300 million; Opportunities Fund will follow with plans for $600 million

Six years into the business of private equity, Tata Capital plans to hit the street once again to raise about $900 million as the second corpus across its two funds — Growth Fund and Opportunities Fund. Another fund Tata Capital Healthcare Fund will be fully invested in next 18 months, and may need to raise second corpus

The non-banking financial company’s private equity arm started operations in 2009 by raising funds for Tata Capital Growth Fund I (TCGF I). It raised $240 million for TCGF I, which targeted investments into urbanisation, discrete manufacturing and strategic services sector.

Last month, this fund joined Japan’s Igarashi Electric Works and boutique investment bank MAPE Advisory Group to buy out the privately-held auto parts maker Agile Electric Sub Assembly from Blackstone. TCGF I put in $37 million as a part of the deal, which was valued at $106 million.

“Since we expect to return more than 50 per cent of the fund in the coming months, the fund raising for TCGF II will commence shortly,” says Akhil Awasthi, managing partner, TCGF. Apart from Agile Electric, the fund’s portfolio includes auto ancillary company Cebbco, Tata Technologies, Star Health Insurance, Janalakshmi Financial Services, Home First Finance Company, Standard Greases & Specialities and Nearex Pte.

“The corpus for TCGF II will be higher than the TCGF I,” said Awasthi. The corpus is estimated to be $300-400 million by independent consultancy firms who track the industry and its fund rasing plans.  

The largest corpus required for the second fund is from Tata Opportunities Fund (TOF), which closed its $600-million fund raising in 2013. The fund, which announced an investment of about $100 million in app-based taxi aggregator Uber Technologies last week, is expected to be fully invested by the end of current financial year. It is considering a number of similar opportunities.

“The fund has approaches from domestic and global companies desirous of leveraging the fund’s relationships and network for expanding in India — much like Uber,” says Padmanabh Sinha, managing partner, TOF’s advisory team in India. The fund has been making investments in the range of $50-100 million.

Apart from Uber, its portfolio of investments includes Ginger Hotels, Tata Sky, auto parts maker Varroc, residential housing developer Shriram Properties, TVS Logistics and Tata Projects. “The team anticipates raising a second fund sometime during 2016 which will follow a similar strategy and would likely make investments of similar scale,” he says.

Another fund expected to be soon fully invested is Tata Capital Healthcare Fund (TCHF I), which has a corpus of $100 million. “TCHF I has so far committed over $50 million towards investments in six portfolio companies across the entire healthcare value chain,” says Visalakshi Chandramouli, partner, TCHF. This includes Novalead Pharma, Amanta Healthcare, Sandor Nephro Services, and Lokmanya Hospitals.

“The fund expects to deploy the balance corpus in 18 months,” Chandramouli adds.She did not elaborate on the plans further. However, the fund would need at least $100 million for its second corpus when it gets fully invested, say the independent consultants.

Tata Capital has a total of five funds, which also include two small funds namely Tata Capital Innovations Fund and Tata Capital Special Situations Fund. The fund managers for these were not available to share their fund-raising plans.

In an interview to Business Standard in July 2014, Tata Capital managing director Praveen Kadle had said his firm’s $1-billion commitment across the five funds would be fully invested in 15-20 months. This period ends with current financial year. TCGF I and TOF I seem to be on track to meet this target, but TCHF I seems to be a bit delayed. The plans for TCGF II and TOF II indicate they might need at least about $900 million for the second corpus among themselves.