Despite being hit by the global slowdown, India Inc has made expansive plans to enter the private equity (PE) business and raise funds via this route. In the last few months, quite a few groups have declared their intentions to set up funds.
For instance, Indivision India Partners, the PE arm of Future Capital Holdings, is planning to raise another fund – Indivision II, the corpus of which is likely to exceed the $425 million raised through Indivision I.
Sources said that Indivision I has invested around 60-70 per cent of the corpus till now. Some of its main investments include Sula Wines, VLCC, Capital Foods, Tops Securities and Centrum Capital.
There are many other biggies in the fray. Corporate houses such as the Tata and Aditya Birla groups have already announced plans to raise $350 million and $250 million, respectively. Last August, Reliance Capital, the financial services arm of the Anil Dhirubhai Ambani Group, had announced setting up a $1-billion PE fund.
However, experts said they may find it hard to raise funds due to the tough competition from seasoned players. “Corporates would certainly find it tough to garner funds. Already, there is enough competition from ICICI Ventures and IL&FS,” said an investment banker.
Also, the allocations by limited partners (LPs), who are investors in PEs, have been shrinking. Many LPs have lost much money in the international market as well as in India.
What makes it more difficult is that some LPs are unwilling to commit further funds to even some of the existing contracts. As a result, many professional PE funds have extended the fund-raising period.
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Anubha Shrivastava, managing director (Asia), CDC Capital and an LP said, “Our entire portfolio in India has been adversely impacted in this downturn. There is uncertainty surrounding the existing portfolio. We will scale down our investments compared with last year.”
Experts said that though India Inc may largely depend on domestic money to create funds, they would be scouting for international money too. In the domestic market, a good brand name would help raise money.