PRINT THIS PAGE Market for Funds Investors05/09/2007. Source: Asia Private Equity Review (APER).
Funds of varied sizes have been established in India
Aside from China, India has to be the next most vibrant market for limited partners seeking to invest in promising fund management firms. In the first half of 2006, eight fund management firms’ fund raising efforts added an additional US$1.12 billion to the market. In recent weeks, the closing of a number of funds brought in yet an additional US$1.62 billion of fresh capital. With the additional US$1.16 billion also currently being raised, the private equity funds pool in India is set to swell to a new level during the year (fig. 33).
The Billion Dollar Fund
For the first time, India has become home to a US$1 billion fund. In late July, ChrysCapital Investment Advisors announced the final closing of its latest fund, which received US$1.25 billion. ChrysCapital V is now the largest an India-focused fund for the country. With an original target size of US$1 billion, ChrysCapital V attracted 75 global investors as its limited partners, and was oversubscribed. The closing of ChrysCapital V brings the fund management firm’s funds pool to US$2.25 billion, the largest in India.
ChrysCapital V has an investment period of four to seven years, and will focus mainly on growth capital and also buyout opportunities, with deal sizes ranging between US$30 million to US$300 million.
The Million Dollar Funds
However, ChrysCapital V remains an isolated fund to boast such a size. The majority of fund management firms prefer to raise relatively modest fund sizes. Nexus India Capital, a venture capital fund managed by the India-based Nexus India Capital Advisors Pvt Ltd, has attracted US$100 million from a list of institutions and strategic family offices from North America, Europe and Asia as its limited partners. This is the first fund raised by the young fund management team, which commenced operations in December 2006. The founders have rich backgrounds in the information technology investment industry, and the firm is expected to focus on investing in Indian technology firms that are in the start-ups stage.
Another domestic firm, Atherstone Group, has indicated that it will be launching a US$75 million fund that will focus on small and medium enterprises in India. The fund has already received commitments from investors in Europe, and will make at least 20-25 investments with deal size ranging from US$1 million to US$4 million.
Ahterstone Group is a boutique financial services firm. It is currently engaged in real estate investments through its Belgrave Atherstone India Real Estate Fund, which has a target size of US$200 million.
The Domestic Venture Funds
Even though a variety of funds by size, are being established for the Indian private equity market, GVFL Ltd., one of the oldest venture capital fund management firms in the country, continues its investment focus with unwavering commitment. The Gujarat-based venture capital firm announced its plan to launch two new venture capital funds that will chalk up an additional 3 billion rupees (US$73.8 million) to its current funds pool.
This newly launched SME Technology Venture Fund has a target fund size of 2.5 billion rupees, and will invest in early and growth stage technology companies in India. Mr. Vishnu Varshney, Managing Director of the GVFL Ltd., told the press that the new fund has already started its fund raising exercises, with the first closing expected to receive 500 million rupees of commitments from domestic investors. The fund’s final closing is expected to take place in January 2008.
GVFL also plans to raise a 500 million rupee fund to target India’s tourism business. It will be a joint venture capital fund between GVFL and the Indian government.
The Indian government continues to play an active role in the country’s venture capital sector. Most recently, the Andhra Pradesh government’s Andhra Pradesh Industrial Development Corporation has teamed up with Ventureast Fund Advisors India Ltd. to launch a venture capital fund, Ventureast Tenet Fund II. It will invest in early-stage companies which focus on providing technology services to the SME, IT and communications technology plus environment oriented technology sectors. Google, Inc. is reported to have taken a 30% stake in this fund which has already received US$15 million in commitments.
The Foreign Venture Funds
In parallel with the domestic venture investor interest in seeking a opportunities in early stage technology companies are those coming from Silicon Valley. Bessemer Venture Partners is the latest to declare an allocation to the Indian venture capital market. The revelation came following the final closing of the firm’s seventh global fund, Bessemer Venture Partners VII (BVP VII), which attracted US$1 billion of committed capital. Out of the US$1 billion fresh capital, Bessemer Venture Partners, one of the oldest names in the US venture capital industry, will allocate US$350 million to India from BVP VII.
Comments
The next wave of funds that will be established for opportunities in India are those that will target infrastructure opportunities. There are local reports that suggest IL&FS Investment Managers Limited and Standard Chartered Private Equity Limited are in discussions to set up a 50:50 joint venture US$1 billion India-focused infrastructure fund. The signing of this agreement is expected to be announced by the end of July. This hardly comes as a surprise, especially in light of recent comments made by Finance Minister Chidambaram. For India to sustain its current economic boom, according to the Minister, India will need US$475 billion for infrastructure development over the next five years. The launch of an infrastructure fund could thus not be more timely for India (fig. 34).
Asia Private Equity Review (APER) is the foremost voice on matters related to private equity/venture capital in the region. Well-recognised as being the singular source for accurate and timely news, in-depth analysis and global perspectives, APER is published by the Hong Kong-based Centre for Asia Private Equity Research. For further information please visit their website at www.asiape.com or email them at info@asiape.com
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