PE Ma­jors Ready Plans to Raise .` 17,700 cr in a Year

Limited part­ners show in­ter­est in in­vest­ing af­ter elec­tion re­sults change sen­ti­ments

The Economic Times - - Economy & Sports -

SSNEHA SHAH &MAD­HAV CHAN­CHANI

purred by the sharp turn­around in eco­nomic sen­ti­ment, sev­eral pri­vate eq­uity (PE) funds in­clud­ing CX Part­ners, Mul­ti­ples Al­ter­nate As­set Man­age­ment, IVFA, Ever­stone and Ex­po­nen­tia Cap­i­tal are rapidly swing­ing into a fund-rais­ing mode. In all, these funds are gear­ing up to try and raise at least $3 bil­lion (.`17,700 crore) in the next 12 months, in­ter­views with highly-placed sources at each of these funds sug­gest. “The elec­tion re­sults have changed sen­ti­ments. LPs are now re­cep­tive to the idea of in­vest­ing in In­dia,” said PR Srinivasan, founder and man­ag­ing part­ner of Ex­po­nen­tia Cap­i­tal. LPs or limited part­ners are in­vestors who put in money that PE funds go ahead and in­vest. “Last week, we heard from in­vestors we have been chas­ing for a year. They are now ready to give our fund-rais­ing plan a sec­ond look,” said a PE fund man­ager who has been strug­gling to raise funds for the last two years. He cur­rently man­ages $500 mil­lion. “Yes, we are rais­ing funds. We have been get­ting a good re­sponse from LPs,” said Prakash Nene, man­ag­ing di­rec­tor & CFO at Mut­li­ples Al­ter­nate As­set Man­age­ment. Though Nene de­clined to re­veal how much he plans to raise, in­dus­try sources say the fund is look­ing at a larger cor­pus of around $500 mil­lion, com­pared to the $410 mil­lion it raised the first time around. Some early stage and mid-mar­ket funds such as Light­box Ven­tures, Gaja Cap­i­tal and Blume Ven­tures are also al­ready on the road to raise money. This is the first whiff of op­ti­mism for the PE in­dus­try which has been strug­gling on many fronts in­clud­ing in­abil­ity to raise funds or re­alise ex­its and more than a few dud in­vest­ments. PE/VC fundrais­ing for In­dia fo­cused ve­hi­cles slipped to $2.25 bil­lion across 26 funds in 2013, com­pared to $3.88 bil­lion raised by 34 funds in 2012, ac­cord­ing to data from E&Y.

Voices from the LP com­mu­nity sug­gest that the new op­ti­mism, flow­ing from a strong govern­ment at the cen­tre, is not un­founded.

“Many PE man­agers de­layed their fundrais­ing to 2014 and are now plan­ning to get back in the mar­ket post elec­tions. Some have al­ready started soft mar­ket­ing,” said Anand Prasanna, di­rec­tor at fund of funds Mor­gan Creek, which has $8 bil­lion un­der man­age­ment. Mor­gan Creek in­vests in these PE funds. Mul­ti­ples Al­ter­nate, for ex­am­ple, has started ‘soft-mar­ket­ing’ to gauge the in­vestor in­ter­est be­fore for­mally hit­ting the road. But LPs will be se­lec­tive, look­ing for a proven track record be­fore com­mit­ting money and will be wary of sec­tors like in­fra­struc­ture that have dis­ap­pointed in the past.

“Our in­vestors have asked us for spe­cific sec­tors that we in­tend in­vest­ing in. There are con­cerns over cer­tain sec­tors and LPs have asked for a clear strat­egy this time,” an­other fund man­ager said.

LPs have had a dis­ap­point­ing run in In­dia the past few years. The big­gest con­cern till date for the ex­ist­ing in­vestor has been the re­turn on their cap­i­tal from In­dian mar­ket, which due to cur­rency fluc­tu­a­tion and macroe­co­nomic pol­icy changes has been poor. “For 2007/8 vin­tage funds, sev­eral LPs have re­ceived less than 15 cents for ev­ery dol­lar in­vested,” said Srinivasan. “LPs would want to see re­turn of cap­i­tal, be­fore they in­vest more.”

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