PE funds woo West Asian investors

After equity markets, it is the turn of private equity funds to woo investors from West Asia to India. The market for West Asia-based PE funds in India is growing at a scorching pace, leading to a slew of deals by these players.

An expected slowdown in the US has prompted oil-producing nations to look for greener pastures and India, being the second fastest on the growth track, has become undisputed choice for private equity investors from West Asia.

Although West Asian investors have been active in India for long using private banks such as UBS, Credit Suisse and Morgan Stanley that invested across emerging markets, post-9/11, the US has been falling out of favour as investors count the risk that assets in the country could be targeted over security concerns.

PE investors say that the interest from LPs (Limited Partners) in the region has consistently grown during the last two-three years.

There is also a two-way relation. As LPs from West Asia expand their footprint to India, fund managers in India have an opportunity to diversify their investor portfolio and protect themselves from the ripple effects of foreign economic slumps.

Motilal Oswal Venture Capital Advisors, the private equity arm of Motilal Oswal, which recently closed its $125 million fund has raised almost 55 per cent from West asian investors, which include family-operated businesses and ultra high networth individuals.

There are a number of PE funds from the Islamic world currently active in India, which include Baer Capital, Evolvence India Fund and Sabre Abraaj, among others.

Baer Capital has Dubai ventures, one of the investment arms of Dubai Holdings, and Shuaa Capital as its Limited Partner.

It has an India-focused private equity fund called Beacon India Advisors. Beacon India Private Equity Fund focuses on consumer and infrastructure sectors and other businesses benefiting from India's competitive edge.

It has invested Rs 75 crore ($19 mn) in A2Z Maintenance and Engineering Services. More recently, the fund house has invested $150 million in Delhi-based real estate group Vatika.

Oman Investment Fund (OIF), along with global PE firm 3i and Cisco, invested $125 million in Mumbai-based TV content and broadcasting company Nimbus Communications.

"We saw PIPE returns of 30-40 per cent in public markets last year. But given the recent correction in markets, there is a need to move from public markets to private equity to maximise returns, " said a partner at a private equity firm on conditions of anonymity.

Similarly, Dubai International capital, the investment arm of Dubai Holding holds 2.87 per cent stake in ICICI, India's second largest bank.

Dubai Ventures, a subsidiary of Dubai Investment Group, invested $40 million, approximately five per cent, stake in Bharat Hotels Ltd., India's largest and fastest growing privately-held hotel company. It also picked up a 40 per cent stake in Indian IPTV company Time Broadband last year.

The other major middle-east based PE player is Evolvence India fund, sponsored by Evolvence capital, a Dubai-headquartered financial services firm specializing in alternative investment space.