PE Fund Raising Trends & Challenges -VCCircle

Posted on April 1, 2011 by

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The PE fund raising activity in India for 2010 was down 30% from the levels of 2009 at $2.4 Bn, while the global PE fundraising was down marginally at $225 Bn for 2010 as compared to $234 Bn for 2009.
Fund Raising Trend

The fund raising trend in India is inline with the Global fund raising activity as the global fund raising also witnessed a dip in the past couple of years, however the Asian fund raising activity witnessed a 20% rise in 2010 after a dip in 2009, it was mainly due to RMB denominated funds in China.

India has been getting close to 1% of the global share of funds for PE, it’s share in India was on the rise till 2009 but it came to 12% in 2010 as India focused PE funds were unable to attract LPs while China, the driver of the Asian fund raising activity was able to raise RMB denominated funds.

Global PE Fund Raising Activity

Year India Asia Global
2005 2683 29304 306290
2006 7085 47306 480573
2007 6644 58210 588451
2008 8753 50582 590314
2009 3345 16235 234860
2010 2374 19644 225000

* Figures in $Bn

Here is the fund raising activity for 2010 and the last two quarters of 2009

Fund Size(In $Mn)
Peepul Capital 312
Axiom Asia Private Capital Fund II 950
Ascent India Fund III 350
Tata Capital Special Situations Fund 160
Aditya Birla Capital Advisors 147
Elevar Equity Advisors 70
Microvest II 60
Faering Capital 160
Banyan Tree Growth Capital 100
CX Partners Fund I 515
Multiples Alternate Asset Management 250
Avigo SME III 250

Despite the dip in the PE fund raising activity, funds with a track record of Indian investments have been able to close funds.

There are a number of funds on the road looking to raise funds for investments in India. Many of these funds are being set up by Ex-heads of PE funds or I-banks. Such first timers have found it difficult to raise funds.

Here is a list of PE funds on road for fund raising

Fund Size (In $ Mn) Headed By
3i Capital 1500  
KV Asia Capital 500 Karam Butalia (former head of StanC PE)
Arka Capital 400 Rajesh Khanna(Former MD of Warburg Pincus)
Tara India Fund IV 400  
Canbank Venture Capital Fund 225  
Ventureast 200  
Ambit Capital 150 Primarily An I-Bank
Access india Advantages Fund 150 Nilesh Mehta(Former MP of Aureos Capital)
Franchise India Holdings 100 Franchisee and Retail Solutions Provider
Headland Capital Partners 85 Formed after a MBO of HSBCs PE biz
Redwoods Capital 50 Anuj Nautiyal(BNP Paribas Real Estate Head)
SIDBI venture Capital Limited 22  
Gujarat Infrastructure Fund 1080  
Everstone Capital 550  
OrbiMed Advisors 312  
Asia Healthcare Fund 200 Anand Burman(Former Dabur Group Chairman)
MOSL 300  
BTS Investment 150  
Aavishkaar Goodwell India Microfinance Development 100  
DAR Capital 43.2  

Challenges ahead for the PE fund raising
PE Dry Powder in India

There is about $10-$12 Bn of PE funds waiting to be deployed in India. According to data from Preqin in July’10, ICICI Venture, NSR, Macquarie, India Value Fund, Sequoia, IDFC Project Equity, 3i capital,IL&FS, Chrys Capital and Baring PE were  sitting on more than $4 Bn of dry powder to be deployed in India.

  • 3i Capital is raising a $1.5 Bn fund for investment in Indian companies. It already has a $1.2 Bn 3i India Infrastructure Fund which was closed in 2007. As on 30th Sept 2010, the fund was 42% invested having completed three investments.
  • India Value Fund has raised $725 Mn fund in 2009, it is still to be deployed.
  • Baring PE India launched a $550 Mn Baring India PE Fund III Ltd in 2008. The fund has so far invested about $75 Mn in 3 companies.
  • IDFC Project Equity raised a $927 Bn fund in 2008 for investments in Infrastructure assets. It has so far invested about $ 450 Mn across 12 investments.

PE Investment Trend in India

Average Deal Size for PE Investment in India

Year 2008 2009 2010
Average Deal Size 31.5 19.64 25.00

 

If we consider a PE dry powder of $10 Bn for investment in India and the current average PE deal sizes, the funds are enough for about 250-300 deals.

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Posted in: India