For PEs, domestic fund tap turns a gusher

Private equity firms that bank on domestic investors are finding it easier to raise money as they have managed to give decent returns, even as funds dependent on international funding continue to remain subdued.

If the recently closed deals are anything to go by, domestic investors are so bullish that venture capital/PE firms are not only meeting targeted corpus but also adding a few hundred crores more.

For instance, IIFL Alternate Asset Advisors Ltd, India Infoline’s venture capital arm, last week raised the size of its Rs500 crore real estate fund – IIFL Real Estate Fund (Domestic) Series-1). The fund, scheduled to close this month, will now close with Rs700 crore.

Balaji Raghavan, CEO and CIO of IIFL Alternate Asset Advisors Ltd, said, “Foreign money has not been forthcoming in the last couple of quarters for various reasons. There is a general negativity about the country and the economy as such because of credit downgrade, slowdown, taxation and GAAR to name a few. A couple of players looking to raise money outside have shelved plans.”

ASK Property Investment Advisors — the real estate private equity arm of ASK group — closed its second real estate fund (ASK Real Estate Opportunities Fund) on Monday by raising Rs1,000 crore.
According to company officials, the large corpus raised is in a contrast with the funding constraints witnessed by the real estate fund industry and is possibly the highest amount raised domestically by any realty fund in the last 4-5 years.

Sunil Rohokale, MD & CEO of ASK Investment Holdings, said despite tough economic conditions ASK has been able to leverage its strong relationships with existing clients for investments in the new fund.  “Majority of our investors have been repeat investors from our first fund, who have experienced our strategy and performance,” he said.

In March this year, the Ask fund made its first exit in Noida at an internal rate of return of 54% with a multiple of 2.45. Amit Bhagat, MD & CEO, ASK Property Investment, said the current environment, also provides excellent countercyclical opportunities.

“Our first exit is a clear indicator of the potentially sound investment track record and investors have rewarded us with higher contributions in the second fund,” said Bhagat.
Another such example is of Motilal Oswal Private Equity Advisors’ India Business Excellence Fund-II. The fund is nearing a close for its second round of fundraising, according to a source.

Although there has also been a Rs100 crore investment from a fund of funds entity, the majority of the Rs450 odd crore in commitments are from domestic investors. The fund is set to close by first week of July.