Reliance AIF to launch credit fund worth ₹1,000 cr

We are targeting highgrowth firms in the unorganised sectors, whose growth could be further accelerated because of these changes

Reliance AIF Asset Management Co Ltd is raising its first equity-focused alternative investment fund (AIF) of up to ₹1,000 crore — Reliance Equity Opportunities AIF-Scheme 1 — a company executive said.

Reliance AIF, a unit of Reliance Nippon Life Asset Management Ltd, expects the new fund to achieve its first close in about a month. A first close is the point at which a fund that is in the process of raising money starts investing.

The fund has a base size of ₹500 crore and a green shoe option of another ₹500 crore.

The latest AIF from Reliance AIF Asset Management seeks to tap the opportunity created in the Indian economy due to major structural changes such as GST, digitisation, and demonetisation, which are expected to drive formalisation of the economy.

“The changes that have been happening in the economy, whether it is GST, demonetisation, Aadhaar-based identification, digital land records, Unified Payments Interface etc, the entire thing is driving a move from unorganised to organised sector. There are so many opportunities on this front, which we are looking to capitalise on,” said Shahzad Madon, head of portfolio management services and alternative assets at Reliance Nippon Life Asset Management Ltd.

The sectors where the investment manager expects this trend to play out prominently include diagnostics and hospitals, building material, jewellery, branded apparel, plastic packaging, rural lending, retail and dairy among others. “We are looking at areas where the share of the unorganised sector is very high and which will over time reduce because of these factors. The companies we are targeting are highgrowth companies in these sectors, whose growth could become further accelerated because of these changes,” said Madon. “The stocks that we look for are existing or potential leaders in their field with high capital efficiency, high return on equity, low dilution.” The fund will invest in 15-20 companies, he added.

The fund’s focus is on midcap, emerging companies. The fund will invest in firms with a market cap of under ₹20,000 crore. “If you look at the large caps, they operate in areas which are already dominated by organised sector, so the theme of taking the share from unorganised market is not likely to happen,” said Madon.

Madon expects to wrap up fundraising for the latest AIF in around three months. The fund has a lifetime of three-and-a-half years from the final closing.