PE Majors Ready Plans to Raise .` 17,700 cr in a Year
Limited partners show interest in investing after election results change sentiments
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.”