Global financial powerhouse Franklin Templeton is looking to raise its second India-focused private equity (PE) fund with a target corpus of Rs 500-600 crore. This is the second time that Franklin Templeton - under Franklin Templeton Private Equity Strategy (FTPES) - is raising funds predominantly from Indian high net worth individuals (HNIs).
Earlier, in 2008, Franklin Templeton had raised close to Rs 500 crore, after getting an extremely good response from HNIs in India.
Deepa Sankaran, managing director, Darby Asia Investors (investment advisors for Franklin Templeton Private Equity Strategy or FTPES), told Business Standard the process to initiate the second India fund would start shortly. Darby Overseas Investments is the PE arm of Franklin Templeton Investments - and makes PE investments in emerging markets in Asia, central and eastern Europe and Latin America.
"We are firming up the papers to be filed with the authorities. The new fund will be a mezzanine fund with long-term horizon and it will have the ability for redemption," said Sankaran. In 2008, FTPES had wrapped up the fund raise within a few months of launching, on the back of extremely good response from Indian HNIs.
The new fund is expected to be structured on the lines of the earlier one, which was a closed-end, rupee-denominated PE portfolio that sought to provide returns by selectively investing in high-growth, mid-sized unlisted companies in India. The earlier fund has been fully invested in eight investments and is currently in divestment mode. The fresh fund, as and when it will be raised, will also be advised by Darby Asia Investors (India).
This decision by Franklin Templeton to ready the platform to raise its next PE fund comes at a time when its total exposure - together with Darby and Franklin Templeton Private Equity - has crossed the Rs 1,000-crore mark. Franklin Templeton and Darby have made some good bets on Indian companies, including the ones in Cafe Coffee Day, Bhoruka Power, Career Point, Electrosteel, Escorts Construction Equipment and GKC Projects, among others. The funds have also scripted handsome exits from some of the investments, including the recent one from Symbiotec Pharmalab when it sold its stake to another PE player - Actis. Even as FTPES is gearing for its next Indian rupee fund, Darby is parallelly increasing its exposure in Indian companies and is currently investing from the Darby Asia Opportunities Fund III, a $300-million Asia fund.
This move by FTPES comes at a time when the general industry view is that Indian PE has failed to live up to investors' expectations, led primarily by a lack of exits.
According to data from VCCEdge, India has attracted $104.5 billion in private equity/venture capital investment since the start of the century and has returned only $27.5 billion through exits.
The significant fall in the rupee has made generating decent returns more difficult for offshore funds. Macroeconomic challenges and the slow reform process have hardly helped.
"Of course, everyone is waiting for the new government to come in and is hopeful of positive measures to boost the economy and augment growth. That apart, 2014 is going to be a year when General Partners focus more on improving portfolio performance and work on exits," an industry analyst noted.
