IDFC to expand platform investments in Fund IV

IDFC plans a maximum of 12 investments from the fund, which recently reached a first close of $100 million and is expected to close at the target of $300 million later this year, IDFC Partner Girish Nadkarni told AVCJ. Of those deals, a third are expected to be build outs or platform investments and the rest will be minority growth deals.

Though minority investments are expected to account for the majority of investments from the new fund, the firm considers its platform-building strategy to be its main focus. The most well-known product of this approach is Green Infra, the clean energy producer that IDFC originally incubated in 2008 and has since built into one of India’s largest renewable energy groups with 665 megawatts of wind capacity in operation and under development, and a further 35 MW of solar assets.

IDFC has partially exited the company, selling a 60% stake to Singapore-based Sembcorp Utilities in 2015 for INR10.6 billion ($167 million). Nadkarni said one challenge for the firm is finding the right balance between building such platforms, which can produce lucrative exits but require considerable investments of time and effort, and minority deals that require relatively less engagement  from the firm but can deliver decent returns.

“When you create platform transactions it takes a lot of time. The partners have to work very hard with the CEO for at least three years until the business starts growing on its own, so there's a limitation on how many platform transactions we can do,” Nadkarni said. “Ideally we would like to do many platform transactions, but that’s not practical.”

Like the previous vehicle, the fourth fund will focus on investments in consumer-focused businesses, along with the food and agriculture, healthcare, education, entertainment and technology, media and telecom sectors.

In recent years IDFC has focused on exiting investments from its third fund. It made a part-exit from dairy firm Parag Milk Foods in May 2016 via the company’s IPO, realizing INR1.8 billion ($26.7 million). The GP also sold a stake in Viom Networks to American Tower Corporation in 2015, made a full exit from Maharashtra Natural Gas Limited to Indraprastha Gas, and divested a partial stake in StarAgri to Temasek Holdings in 2014.

In addition to its PE activity, IDFC also invests in Indian infrastructure assets from its dedicated infrastructure fund, which closed in 2014 at $900 million. Investments from the fund include a controlling stake in the Bangalore Elevated Tollway, which the firm bought from NCC Infrastructure Holdings and Some Enterprise last year at an enterprise value of INR7.5 billion including debt.

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• Topics
• South Asia
• Fundraising
• Buyout
• India
• IDFC Private Equity