SBI to commit Rs 635 crore for new PE fund

Joint venture with Oman's sovereign fund is raising $300 million

State Bank of India (SBI), India's largest lender, is making a big bet on the bustling private equity (PE) space. It has committed $100 million (Rs 635 crore) for a new $300-million (Rs 1,900 crore) PE fund being raised by Oman India Joint Investment Fund (OIJIF). This will be one of SBI's largest commitments to the PE space till date. OIJIF is a joint venture between SBI and the sovereign wealth fund of Sultanate of Oman.

While Oman's State General Reserve Fund (SGRF) will commit one-third, the rest will be raised from third-party limited partners. "The sponsors are committing two-thirds, while the rest will be by other investors," said a senior executive familiar with the move. SBI's investment would be out of its balance sheet. The new fund will be sector-agnostic and is likely to start investing by the end of the year. Given its larger size, it could look at slightly larger ticket sizes than the first fund, which was focusing on $5-15 million (Rs 30-90 crore), analysts said.

An email sent to SBI officials did not elicit any response.

However, the bank has talked about the intention of the joint venture to launch a second fund in the annual report for FY15, published recently. "The Oman India Joint Investment Fund, set up in 2010, has completed its investments for Fund 1, worth $100 million. The partners have decided to launch Fund 2, with a corpus of $300 million," said the annual report. The joint venture has the mandate to raise up to $1.5 billion and is likely to raise more funds in the future.

The bank further said, "We continue to explore opportunities in the area of private equity and venture capital fund (VCF) investments. During FY15, five new VCF investments amounting to Rs 495 crore were committed to."

Led by Srinath Srinivasan, who earlier headed Reliance PE, the top bets of OIJIF's first fund include minority stakes in commodity exchange NCDEX and sportswear firm SSIPL. SSIPL recently received the nod of the market regulator for an initial public offering. Other investments of the fund include ING Vysya, Gujarat-based agri sciences firm GSP Crop Science, electronics board and systems maker Indus Teqsite and listed commercial explosives maker Solar Industries.

Apart from SGRF, SBI has other funds with international partners. It had set up a joint venture with Macquarie and IFC in 2008, to manage a $1.2-billion India-focused PE fund. This fund has invested approximately 96 per cent of its total capital commitments, the annual report said.

Further, the social infrastructure-focused VCF, the Neev Fund, with a target fund size of Rs 660 crore, was operationalised jointly with DFID (UK) and SBICAP Ventures.

SGRF invests in about 25 countries with Emerging Asia, accounting for seven per cent of its portfolio. The fund has generated an average annual return of 7.5 per cent since its inception in 1980. It typically invests 65-85 per cent in public markets and 15-35 per cent in private equity, its website said.

According to a profile by Sovereign Wealth Fund Institute (SWFI), SGRF invests in diversified portfolio of non-oil overseas assets. "The fund was originally created to support Oman's planned expenditure. However, the Oman finance ministry has reinforced its governance structure," SWFI said.

TOP BETS OF OIJIF'S FIRST FUND

Unlisted

• NCDEX
• SSIPL (heading for IPO)
• GSP Crop Sciences

Listed

• ING Vysya
• Solar Industries

Fund 1: $100 million already fully invested
Fund 2: $300 million sanctioned, raising now
Potential limit for future funds $1.5 billion sanctioned, raising now

Source: OIJIF