India-Focused Private Equity Fundraising – 2009 to Present

by Wan Ping Chia

  • 01 Jun 2012
  • PE

India is one of the more significant private equity markets within Asia, with the market evolving over the years. In this blog we detail the fundraising for India-focused private equity funds in each year from 2009 to present.

In 2009, Preqin tracked the closing of 15 wholly India-focused private equity funds, excluding real estate and infrastructure, representing an aggregate $2bn of capital raised from investors. Fifty-one percent of the total value was invested in growth stage enterprises, while another 36% targeted buyout opportunities in India. The rest of the capital was raised from early stage, special situation and fund of funds vehicles. It is no surprise that 98% of the total value was raised from India-based fund managers, while the remaining 2% was raised from US-based Granite Hill Capital Partners and Germany-based RenditeWertBeteiligungen. Granite Hill Capital Partners closed its venture fund, Granite Hill India Opportunties Fund, on $18mn in 2009, while RenditeWertBeteiligungen garnered $13mn for its fund of funds vehicle - RWB Special Market Fonds India II. The fund of funds targets mainly buyout funds, but may consider other fund types such as venture and mezzanine. The largest wholly India-focused private equity fund to close in 2009 was India Value Fund IV, a $725mn venture fund managed by India Value Fund Advisors, a domestic-headquartered GP.

In 2010, wholly India-focused private equity funds raised a slightly higher total capital of $2.5bn. Similar to 2009, the largest bulk of the capital (58%) was targeted at growth opportunities – reflecting the developing nature of the domestic economy. Interestingly, however, there were no India-focused buyout funds closed in 2010. Venture capital funds gathered 26% of the total value raised in 2010, while the remaining capital was raised from other fund types including funds of funds, mezzanine and special situation vehicles. GPs raising India-focused funds came from a wider geographical scope in 2010, including Mauritius, Singapore, Switzerland and the US. India-focused funds raised by India-based GPs contributed to 78% of the total capital gathered. With a fund size of $515mn, CX Partners I stood as the largest wholly India-focused private equity fund closed during the year. It targets growth opportunities and is a first-time fund raised by CX Partners, a spin-off from Citigroup Venture Capital International.

2011 proved to be a difficult year for wholly India-focused funds hoping to raise capital, with a number of fundraising efforts being put on-hold. The chief reason for this is that many Indian fund managers await the release of the Alternative Investment Funds (AIF) Regulations, established by Securities and Exchange Board of India (SEBI). Despite this caution, however, an aggregate $3.1bn was garnered from India-focused private equity funds in 2011. This represents a greater amount of capital being raised in the year than in 2010 and 2009, and reflects the significant expansion of the private equity industry in India over the past few years. Fund managers continue to favour growth opportunities in the country, with such funds contributing to 76% of the total capital raised. Twenty-three of the total fundraised value was gathered from venture funds, and the remainder from buyout, distressed debt and fund of funds vehicles.  Similarly to 2010, 2011 saw nearly three-quarters of the aggregate capital raised by India-based GPs, with the remainder from GPs located in China, Germany and the US. The largest wholly India-focused private equity fund closed in 2011 was Everstone Capital Partners II. Managed by India-based Everstone Capital, the growth fund gathered $580mn in aggregate capital. Of the wholly India-focused funds raised by foreign fund managers in 2011, SAIF India Fund, with a value of $350mn, ranks as the largest fund. It is also a growth fund, but is managed by a China-headquartered GP - SAIF Partners, which also has offices in Hong Kong and India.

What does the future hold for India-focused private equity? There are currently 55 solely India-focused private equity vehicles on the road, seeking over $9.4bn in aggregate capital. Nearly half (49%) of the targeted figure is made up of growth vehicles, 20% from venture vehicles, and the remainder from buyout, funds of funds and special situation funds. India-based fund managers are seeking to raise 81% of this total capital, while GPs from Mauritius, Netherlands, Spain, the UK, United Arab Emirates and the US are also looking for a share in the Indian market. Targeting $1bn, AION Capital Fund is currently the largest wholly India-focused private equity fund on the road. The sector-agnostic special situation fund is jointly established by ICICI Venture Funds Management and Apollo Global Management. It seeks opportunities in companies facing special or distressed situations, including corporate spin-offs, corporate restructuring, illiquid secondary stakes, cross-holding stakes, privatisation, bankruptcy and non-performing assets or loans (NPAs or NPLs).

Last month, SEBI released the finalised AIF Regulations, aimed at allowing flexibility in alternative investments while at the same time providing systemic stability via regulations. It has also created disclosure requirements that will encourage transparency in the market. Following this release, there is a likelihood of some India-based GPs resuming fundraising activities. There may also be an increase in the total capital raised in 2012 as a result of this.

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