Hoping to ride on the "Modi wave", a clutch of private equity (PE) firms are in the market for fund-raising. Some of them have already deployed 70-80 per cent of their first fund and are in talks for the second round of raising funds. Although general partners (GPs or fund managers) believe their reputation and the balanced portfolio from the first fund will help them, experts say limited partners (LPs or global investors) have not yet changed their view on the Indian market.
GPs such as Renuka Ramnath, Ajay Relan and Sameer Sain had made soft-launch of their new funds recently.
Charles Daugherty, managing partner, Stanwich Advisors, a US-based firm that helps GPs in raising funds, said: "The recent win by (Narendra) Modi is perceived by many as a positive. Many investors are taking another look at India. All these investors were very disappointed with the performance of their Indian managers. Most still need further evidence that the real change is coming."
Multiples Alternate Asset Management, a PE firm floated by Renuka Ramnath, is in the process of raising $500 million for its second fund. Multiples had raised its maiden $405-million fund in 2010 and deployed $315 million so far in companies such as Arvind, Cholamandalam Investment and Finance, DelhiVery, Indian Energy Exchange, PVR, South India Bank, Sara Sae, Vikram Hospital, among others.
Ramnath, managing director and CEO of Multiples, believes LPs are still excited about India as an investment destination. "LPs are excited about India from a macroeconomic perspective. However, they are cautious about whom to entrust the money to, primarily because there are concerns around the number of profitable exits being made."
Multiples has made 10 investments and made profitable partial exits in two of the portfolio companies.
Ajay Relan-led CX Partners, which had raised $515 million in its maiden fund, raised a new mezzanine fund last year. CX Partners have also made a soft launch for its $400-million second fund. Private equity firm Everstone Capital, which has launched Everstone Capital Partners III LP to raise $600 million, has received commitments worth $50 million from International Finance Corporation.
Vikram Hosangady, national leader (private equity) at KPMG India, said: "Most LPs will be far more cautious on allocation than before, but fund managers with a good reputation and good investment philosophy will attract funds. It is likely to take longer and the role of LPs in the fund may also be more active than in the earlier cycle."
Change in investment strategies also got backfired to the GPs, say experts. "PE fund managers have also shifted their investment strategies from when they initially raised their funds and, therefore, may be criticised for strategy drift. They may have raised their funds to focus on growth and have invested in real estate, venture, cross border and passive PIPE (private investment in public equity) transactions or public securities," said Daugherty of Stanwich Advisors.
Compared to 2012, which saw 53 funds being launched with a corpus of $3.2 billion, 36 funds were launched in 2013 with a corpus of $2.9 billion - a decline of 10 per cent. There is a growth in fund size in 2014, where $3 billion has been raised till date through 28 funds.
