Only five launches in 2010; investors look to diversified funds.
The foreign investors’ attraction for India funds seems to be as restrained as in 2009, with only five such funds launched in the first two months of 2010, mobilising $492 million.
The only big fund-raising was done by Ascent Capital, an Indian private equity (PE) firm focused on growth capital, which raised $350 million through Ascent India Fund-III. The fund was oversubscribed, but the partners were not in favour of increasing the cap beyond what they believed to be the optimal size.
A fund manager with an Indian investment bank which raised funds for an India-dedicated fund in the early part of the current financial year said on condition of anonymity that investors in global markets preferred diversified funds.
Hence, most of them are investing in emerging market and BRIC funds, which invest a part of the corpus in the Indian market. Those enthused by the India story want to invest in diversified funds rather than single-market funds.
On the outlook for PE investments in Asia, Anubha Shrivastava, managing director of CDC Group’s Asia Team, said: “Overall, in 2010, I would expect the environment for PE fund-raising in Asia to be more positive than last year, with fund managers who held back from raising funds in 2009 coming forward. Investors active in Asia, such as CDC, expect to scrutinise more funding proposals. We might also expect to be joined by investors traditionally focused on established markets and now wishing to diversify.”
India fund data compiled by Bloomberg show only 14 funds were launched in 2009. The mid-cap boom of 2006 attracted huge foreign investment, with 25 funds mobilising over $9 billion. India funds then raised $2.2 billion in 2008 through 43 funds, while 38 funds mobilised $3.3 billion in 2007. In 2005, the first year of the UPA government, foreign investors poured $3.2 billion into India funds.
Interestingly, the domicile of most India funds launched in 2009 and 2010 was Canada, Japan and Luxembourg. A few launched in France, Mauritius and South Korea. Between 2006 and 2008, as many as 26 India funds launched in South Korea, mobilising $1.7 billion, followed by 16 in Luxembourg ($2.8 billion) and 13 in Japan ($3.8 billion). Seven India funds each from France and the US mobilised $1.8 billion and $2.3 billion, respectively, in 2006-2008.
