Over half-a-dozen private equity funds are set to start the process to raise a combined $2 billion (about Rs. 12,000 crore) from local and foreign investors, riding on the bullish sentiment that the change in government has brought to the market.
At least four established PE funds have started discussions with investors by now whereas three have revived previously shelved plans, said people with knowledge of the matter and fund managers.
ICICI Infrastructure Fund, Everstone Capital and Multiples Private Equity have launched road shows for new funds. Arth Capital and Exponentia Capital are among the funds that have brought back plans that had been put on ice.
“We have a commitment of $150 million now and would raise up to $500 million for our infrastructure fund,” said a person with direct knowledge of the ICICI Venture fund’s plans.
ICICI Venture, India’s second largest PE fund, is betting on the infrastructure sector, which is high on the investment agenda of the Narendra Modi government to start the economy. “There is a huge equity requirement for infrastructure projects,” this person said.
Investor sentiment towards India had vinegary in recent years as economic growth slowed to less than 5% in fiscal 2013 and 2014 from over 8% in 2007.
PE funds that have invested more than $50 billion in the past decade couldn’t door their holdings as company valuations took a dive.
With returns from PEs parched, limited partners (LPs), who commit money to these funds, stopped making new investments, delaying closure of new funds.
However those concerns have now relieved as the window for public offers opened again, according to industry experts, fund-raising will still be challenging for those who don’t have a good quality, track record and team continuity.
“PE funds which demonstrate these parameters will have an edge over others,” said Vikram Utamsingh, managing director of transactions advisory group at Alvarez and Marsal. “LPs have been negative as the India story had been dampened for the past four years, but post national elections they are turning positive.”
According to him, investors are watching how the government will enhance the investment climate. “There have been lots of enquiries from investors,” Utamsingh added.
Everstone, owned by former Mckinsey consultant Sameer Sain and partner Atul Kapur, is planning to raise around $750 million, its third fund. They have already made investments from two funds, focusing on companies in sectors such as infrastructure, real estate, consumption and financial services.
Between 2006 and 2011, Everstone raised $975 million, closing the first fund of $425 million in September 2006 and second in May 2011 after raising $550 million.
The last fund invested in 11 companies including Burger King, Hinduja Leyland Financeand Indostar Capital Finance, a non-bank finance company.
“We will raise the third fund by the end of the year only. It’s too early for us,” said a spokesperson.
“Typically, PE funds raise funds once they have invested close to 80% of the money which is typically three-four years from the time they raise the fund,” said Utamsingh.
Exponentia Capital of PR Srinivasan, former head of Citigroup PE fund, has invigorated its plan to raise $250 million.
“Fundraising should accelerate as PE funds successfully exit from some of their investments in the past five years and return capital,” Srinivasan said. But some fund managers say fund closure will take longer.