India funds alter stance slightly

India-dedicated funds overseas are becoming a little more cautious in their performance targets, though they still maintain that India is a long-term growth story.

Fund managers are promising relatively smaller returns to their investors than what they promising in the hey days of the India story.

In fact, many of these funds have started stipulating a lock-in period now, market sources said, to prevent a flight of capital and thus, ensuring that the fund gets enough time to realise the promised return.

This shift comes after the initial euphoria in the overseas markets for the India story. The surge was mainly driven by foreign fund inflows and many India-dedicated funds had climbed on the bandwagon to raise money overseas.

Besides funds investing directly in the market, private equity players are also bullish on India. But after the initial euphoria, there have been some subtle changes in the profile of the money being raised overseas to invest in India.

The sentiment has changed: the surging market has halted as investors factored in the hard reality in terms of high valuations and sustainable corporate performance, inflation pressures due to booming oil prices, interest rate hikes and a slowdown in foreign fund inflows.

Voyager Capital, a US-based fund which recently launched its India-dedicated fund has raised more than $100 million and has stipulated a lock-in period of three years.

Shiv Puri, managing director of Voyager Investment Advisors, said, "India is in a secular growth phase led by a urge in infrastructure spending and the start of a new capital expenditure cycle along with domestic consumption. Voyager will adopt a private equity like style approach, using deep fundamental analysis for investment decisions and have long term investment durations, a holding period of at least 1-3 years."

While Voyager is trying to operate much like a private equity firm, pure private equity players are also scaling up their investment horizon.

Carlyle India Advisors Pvt Ltd, part of the Carlyle Group, a global private equity firm with more than $18.4 billion under management, has made investments of more than $55 million till date.

Wayne Tsou, managing director, Carlyle Asia Investment Advisors, said, "As one of the fastest growing economies in the world, India continues to grow in importance to Carlyle and we plan to expand our presence and investment scope there significantly."

M Shankar Narayanan, managing director of Carlyle India Advisors, added: "The Indian market presents a diverse set of investment opportunities for private equity players in emerging businesses such as retail, insurance, media, telecom, etc; knowledge industries such as IT, BPO, pharmaceuticals, biotech, etc; commodity businesses such as petrochemicals, metals, sugar, tea, etc; and strong domestic consumption plays such as automobile, banks, cement etc."

He added that that they have an investment horizon of at least five years.

Twist in the tale

• Many funds have started stipulating a lock-in period to prevent a flight of capital
  
  
• The shift comes after the initial euphoria in the overseas markets for the India story.
  
• Investors have factored in the high valuations and sustainable corporate show, inflation pressures
  
  
• The surge was mainly driven by foreign fund inflows
  
• There have been subtle changes in the profile of money being raised overseas to invest in India