Live Mint reports that about two dozen private equity industry executives are making an effort to raise up to $2 billion for their new funds. The list includes former Carlyle Group managing director Mahesh Parsuraman and former India Value Fund Advisor partner Sunil Vasudevan’s Amicus Capital; former KKR India director Heramb Hajarnavis’s Sea Link Capital Partners; and Siddharth Parekh’s Paragon Partners.
The $2 billion number does not include other funds raised by established private equity funds such as Multiples Alternate Asset Management Pvt. Ltd, IDFC Alternatives, Relan’s CX Partners, Tano Capital and Motilal Oswal Private Equity.
“India is definitely a shining star. On the fund-raising front, things are better than they were a couple of years back,” said Nupur Garg, regional lead, South Asia at International Finance Corp. (IFC), part of the World Bank group, and one of the largest investors in private equity in the region.
“LPs today, are very open to an India conversation. They are willing to take different bets now and even first-time (fund) managers are today seeing some sort of traction, which was absolutely unheard of (even) a few years back. What is becoming increasingly common is fund managers offering better economics to anchor investors. Anchor investors are being offered a fee or carry discount. Instead of charging a management fee of 2%, funds are offering a discount, say 1.75% as fee to attract LPs,” said Garg. Carry or carried interest is the amount of profit fund managers retain. It is typically around 20%.
According to Bain and Co.’s India Private Equity 2016 report, one reason for the improvement in the fund-raising environment is the recent increase in the number of successful exits by private equity funds. In 2015, private equity funds returned $9.4 billion to their investors as compared with $6 billion the previous year. Deal volumes rose 10% with 213 exits reported—the best in five years.
Valuations are also becoming reasonable; multinationals are looking to divest their Indian businesses; and first-generation entrepreneurs are willing to let go.
