India Value Fund Advisors set to raise Rs 4380 crore from global investors

MUMBAI: India Value Fund Advisors, one of the nation’s largest domestic private-equity players, is fast approaching closure of its $700 million (Rs 4,380 crore) fifth fund, attracting money from across the globe in a clear indication of improving investor sentiment towards the India story.

The fundraising by IVFA, as the fund house is better known, is significant also because the entire PE industry in India raised just $800 million across five funds in the whole of 2014, according to London-based research firm Preqin. The data exclude venture funds as well as infrastructure and special-situation funds raised last year.

Investors, who have shied away from the Indian market, are now more confident about India’s improving macro environment and the bottoming out of the business cycle here, say market players. They are also encouraged by the steps taken by Prime Minister Narendra Modi’s government to revive key sectors such as infrastructure and attract foreign investment, as well as promise to follow non-adversarial tax policies. The country’s economic growth too is picking up momentum, and is expected to outpace China this year.
"Our investors are confident about deploying the entire corpus,” Vishal Nevatia, IVFA’s managing partner, said in an interview with ET. This confident is essential given the fact that the fund returned around $150 million of capital in 2012 from its $750 million fourth fund due to lack of investment opportunities.

“They are clearly considering past track record before investing. This time around, investors have a bottoms up approach,” added Nevatia, whose firm will have $1.8 billion under management after closing new fund.

The Indium V Fund has raised money from sovereign funds, funds of funds and pension funds across the US, Europe, Canada, the Middle-East and Asia. "Majority of the capital is from returning investors and the mix is better this time with them equally spread across regions,” said Nevatia.

The fund has got commitments of around $500 million already and the remaining $200 million will come in by the next 90 days, Nevatia said.

Other PE funds like Multiples and Everstone Capital have also had success in raising funds over the past few months. While Multiples is expected to make a first close at $400 million for its second $650 million fund later this month, Everstone Capital has managed to garner $300-350 million for its new similar-sized fund.

"India is gaining renewed interest as an investment option for private equity due to favourable macro economic, fiscal and political factors," said Dhanpal Jhaveri, managing partner at Everstone Capital.

STARTED INVESTING FROM NEW FUND

The Indium V Fund will continue with IVFA’s strategy of investing in controlled transactions where the fund will end up owning majority stakes. The fund will also do some growth investments, where it will be a minority investor. It has started investing from the new fund already – this week, it invested around Rs 500 crore along with KKR and Leapfrog in Magma Fincorp.

"Over the last six months, we have built a good pipeline of deals. We will invest around $200-250 million this year," Nevatia said. "We will not compromise on the quality of investments. I am very confident of putting this entire capital to use," he said, adding that the new fund will make around 10 investments.

This year is expected to bring a turnaround in the PE fundraising cycle, after a weak 2014. Total capital raised by India-dedicated PE funds fell to $800 million last year from a peak of $3 billion in 2008, shows Preqin data. According to Preqin, 26 Indian private equity funds are currently in the market to raise $5.4 billion.

"The fundraising market has not been good for the last several years, but now the traction is coming for PE investors who have a track record,” said Prakash Nene, MD at Multiples Alternate Asset Management, which raised $400 million for its debut fund in 2010. “For new fund managers, I don't think there will be much traction."

But even as fundraising across private equity slowed down, other segments of the alternative market like venture capital, public equity and infrastructure continued to see traction. "Funds with differentiated offerings, proven track record and people with operational capabilities are able to raise capital," said Mayank Rastogi, partner and head private equity transactions advisory services at EY India.