Tata Opportunities Fund to raise $600 million next year
Tata Opportunities Fund (TOF), the third-party private equity fund advised by Tata Capital, is looking to raise a second fund next year of nearly $600 million, said a senior executive at the fund.
"We are seeing a good deal pipeline and we will be able to deploy our existing fund by the end of this financial year after which we will raise a successor fund of similar size," said Padmanabh Sinha, managing partner at TOF. Of the $600 million corpus in the present fund, $400 million has been invested across six deals. TOF also invested an undis- closed amount in taxi-hailing app Uber Technologies Inc. on 20 August. According to Reuters, the deal was worth $75-100 million.
From its maiden fund, TOF invested the bulk of its capital in Tata group companies. A similar investing mandate will be followed for the next fund, Sinha said. The fund will also have the option of co-investment by limited partners in deals that are larger in size, Sinha added. Limited partners are those who invest in a private equity fund. In a co-investment, limited partners invest alongside the fund.
So far this year, TOF has made two investments. Apart from the investment in Uber, the fund invested Rs.335 crore in Hyderabad-based Tata Projects Ltd for an undisclosed stake in July this year. As part of this deal, the fund acquired a stake from four Tata companies that had been investors in Tata Projects since the company was formed in 1979. Last year, it acquired a stake in Bengalurubased real estate firm Shriram Properties Pvt. Ltd for Rs.468 crore.
The fund's other investments include Ginger Hotels, Tata Sky DTH India, Varroc Engineering Pvt. Ltd and TVS Logistics. "We will invest with a similar strategy, and all our transactions have been sourced on a proprietary basis unlike other funds. We are part of the flagship fund and we have the ability to source good deals," Sinha said. The fund typically invests $50-200 million per transaction and is expecting an internal rate of return of over 20% from its investments. TOF is among a handful of funds that have started or are intending to start raising new funds.
Some of the other home-grown funds that are on the road to raising capital include Renuka Ramnath-led Multiples Alternate Investment Management Pvt. Ltd, which is about to close a $600 million fund-raising round across an offshore and a domestic fund. Others such as CX Partners, ChrysCapital and Aditya Birla Private Equity are also looking to raise funds. "The fund-raising environment is still tough. But there is little choice in terms of geography for the investment dollars to go to. Europe continues to be troubled. The China story, too, is very dented right now. So, relatively, India is in a better position and Indian funds can play this to their advantage," said Kalpana Jain, senior director at Deloitte Touche Tohmatsu India Pvt. Ltd. Also, one of the biggest hitches that investors had with investing in Indian funds was the lack of exits, she said. "If we see the recent trend in exits, that problem has somewhat eased and this should help Indian funds with their fund-raising efforts," Jain added.