ICICI Venture mulls 4 specialised funds

ICICI Venture is planning to set up four new specialised funds, including a small-cap fund, a mezzanine fund, a hedge fund, and a fund of funds.

The size of the small-cap fund will be around $500 million. It will begin with a corpus of $200-250 million, which will be hiked to that figure within the next nine months.

The mezzanine fund will have around $100 million. ICICI is yet to formalise the size or the timing of the other two funds.

ICICI Venture has also tied up with seven of its key investors in its private equity funds that will co-invest with them in acquisitions and buying of stakes in companies.

The need for a small-cap fund was felt because ICICI's current funds are for bigger deals, with an average size of $75 million. The small-cap fund will invest in smaller and emerging companies, which require a fund infusion of between $10 million and $50 million.

With many companies wanting expansion and fresh funds without losing control as a result of dilution of equity, ICICI also felt the need for a mezzanine fund, which would be a combination of debt and equity. It will protect promoters from losing control over their companies without compromising on growth.

As a part of its strategy to become a one-stop shop for investors, ICICI is looking at setting up a fund of funds, an equity fund that invests in other funds. A hedge fund (which will invest for a short period of time) is also being looked into.

At present, ICICI Venture handles assets of over $2 billion, and is the largest equity fund operating from India. ICICI hopes to double assets under its control to over $4 billion by 2010.

The existing assets include the $-810 India Advantage Fund 2, aimed at buyouts and growth capital for small as well as mid-size and large companies and a $-500 million real estate fund that is looking to join hands with developers for commercial as well as residential projects.