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After a long lull, fund raising activity is back in the country’s private equity (PE) sector. Half a dozen entities have announced the first closure of their funds in 2013. However, experts believe even second-time funds or first-time GPs (General Partners or fund managers) with a proven record will be lucky to raise funds in 2013.
Major funds such as ICICI Venture, raising a $750-million India Infrastructure Advantage Fund, managed to make a first close at $275 million. AION India Fund, jointly owned by ICICI Venture and US-based Apollo Global, has raised $325 million. Sunit Mehra, managing partner at Hunt Partners, said, “Internationally, we are now starting to see funds flowing into PE as an asset class once again. Inevitably, some of this, as an allocation will come to Indian funds as well.”
Last year saw a decline of 42 per cent in fund raising as compared with 2011. In 2012, as many as 49 funds raised about $2.9 billion compared with 39 funds worth $5.2 billion in 2011, according to data from VCCEdge. Till date in 2013, about six India-focused funds have raised about $800 million.
ASK Pravi Capital Advisors, a joint venture between ASK Group and Pravi Capital, has made a first close on its debut fund at $37 million or Rs 200 crore. ASK Pravi had launched its maiden Rs 900-crore fund in 2011.
“Some Indian GPs that have raised significant commitments lately are either established firms or with very different strategies compared to the mainstream Indian PE opportunity of growth capital. Quite a few first-time funds have indeed raised commitments, though significantly lower than expectations,” said Jayanta Banerjee, managing partner at ASK Pravi and former president of PE at ICICI Venture.
Two weeks earlier, the Kotak Mahindra group had announced a first close of its $300-million infrastructure PE fund by raising $90 million (Rs 490 crore). Named Core Infrastructure India Fund, it got commitments from Sumitomo Mitsui Banking Corporation, Brookfield Asset Management and the Japan Bank for International Cooperation.
Consolidation of funds or joining hands with another GPs for fundraising is becoming common in India, in the backdrop of a tough fundraising scenario.
Recently, CX Partners had brought former JPMorgan Chase principal, Shishir Jain, as part of launching its $250-million debut mezzanine Intermediate Capital Fund. It is expected to raise about $100 million as first close soon.
Arth Capital was launched last year by former ICICI executive director Sumit Chandwani, and Anish Modi, the erstwhile India head of Hong Kong-based sweat fund ADM Capital. Similarly, Kedaara Capital, was launched in 2011 by Manish Kejriwal, former head of Temasek India and Sunish Sharma, former managing director of General Atlantic India. Last October, Kedaara managed to raise $325 million towards the first close of the $500-million fund.
Vikram Hosangady, head of transaction services at KPMG India, said: “We expect some amount of consolidation in the PE space and fund managers with proven records will either move to larger global PE funds or try and raise monies.”
However, experts believe fundraising will remain tough in 2013 and LPs will choose Indian GPs very selectively. “Given that both international and domestic LPs and investors are now savvy about the challenges of investing in India, they will seek to back only successful second-time funds or first-timers with a very credible track record and teams that have worked together in the past,” Mehra added.
