India’s private equity market is back on limited partners’ radar

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After a nearly three-year slump, limited partners are warming up to the Indian private equity (PE) market again.

Mumbai-based India Value Fund Advisors (IVFA) is the latest homegrown PE firm to raise a new fund this year. It has raised $700 million for its fifth India-focused fund, Indium-V Fund, bringing a six-month fundraising campaign to a close.

“Limited partners are more positive today about India’s macroeconomic environment than they were 12-18 months ago,” IVFA managing partner Vishal Nevatia told Mint over telephone. About 25 limited partners (institutions that invest in PE funds) have invested in Indium-V Fund, and several of them are those that invested in its four earlier funds. The new fund takes the total capital raised by the firm till date to $1.9 billion. “The mix of investors includes emerging market sovereign wealth funds, global pension trusts and fund-of-funds,” Nevatia added.

IVFA is the second local PE firm to successfully raise a large India-focused growth fund since January. Mint reported earlier this month that Mumbai-based Everstone Capital Advisors Pvt. Ltd had completed fundraising for its third fund of $700 million, christened Everstone Capital III LLP. The firm is yet to make a formal announcement on the closing of the fund. An Everstone spokesperson declined to comment on emailed queries.

Another large growth fund that is nearing closure is Multiples Alternate Asset Management Pvt. Ltd, a Mumbai-based PE firm headed by former ICICI Venture Funds Management Co. managing CEO and CEO Renuka Ramnath. The firm’s second fund, Multiples Private Equity Fund III Llp, has raised $450 million so far. It has a final target corpus of $650 million, which it expects to raise by the end of the year.

“For investors, other than macro factors, the only thing that matters is track record. We have already returned 50% of the capital drawn from our first fund and that is enabling us to raise the second fund,” Ramnath told Mint in an email.

The mix of limited partners that have come to back Indian PE funds this year include global institutions such as World Bank arm International Finance Corp. (IFC), the University of Texas endowment fund, and Canada Pension Plan Investment Board (CPPIB). The first two are investors in Everstone’s latest fund. CPPIB is an investor in IVFA’s and Multiples’ new funds. This is CPPIB’s first investment in IVFA. However, it debuted in the Indian market in 2010 with an investment in Multiples’ first fund. It has committed a further $140 million to Multiples’ second fund.

The $1.8-plus billion raised by IVFA, Everstone and Multiples, however, represents a fraction of the number of new funds in the market wooing limited partners. There are an estimated 95 India-focused funds looking to raise an aggregate $20.9 billion, according to data compiled by London-based alternative assets investment research firm Preqin. This includes growth funds like IVFA and Multiples, venture capital funds and real estate and infrastructure-focused funds.

Growth funds that are currently in the market to raise fresh capital include Aditya Birla Private Equity and IDFC Alternatives Ltd which are raising a total of about $1 billion. In September, Delhi-based ChrysCapital Investment Advisors, India’s largest homegrown PE firm, will hit the market to raise a $600-700 million fund, its sixth till date.