MOPE raises $155m India growth fund

The INR5.5 billion ($125 million at the time), 2007 vintage IBEF I has returned 40% of capital to investors so far, from deals such as part exits from non-banking finance company AU Financiers and dairy Parag Milk Foods. This performance helped bring in institutional investors to raise more than 50% of the $155 million follow-on fund, which launched in July 2011 and closed this month. 

"What we have exited in terms of cost is just 10% of our investments. A lot of exits are at various stages and we hope to achieve a few exits in the next 6-12 months," explains Vishal Tulsyan, managing director and CEO of MOPE.

The first fund was raised largely from family offices and high net worth individuals (HNWIs), but second time around 70% of the $105 million raised from international investors is institutional money - including Squadron Capital and the International Finance Corporation.

The deal size has also changed, up from $6-13 million to $8-20 million, which Tulsyan says is in line with the growth of the economy. "Since the first fund was raised in 2007, the size of the economy has more than doubled and so has the size of mid-market companies. Increasing the fund size by around one third is a function of that," he explains.

IBEF II will take significant minority stakes in 12-15 small and medium-sized enterprises (SMEs). More than two thirds of the fund capital will go to consumer, financial services and healthcare companies, while the rest will be invested in sectors such as manufacturing.

The first three are defensive sectors linked to growing consumption and discretionary spending, which is why they have found favor with PE investors, resulting in rising entry valuations. In this regard MOPE has the advantage of its parent Motilal Oswal group, a diversified financial services provider that can help the GP scout for transactions.

"The institution has helped us tremendously in terms of our ability to reach a large number of independent financial consultants who are a source of deal flow for us. It's also helped us extend our reach to tier-two and tier-three cities," Tulsyan says.
A INR350 million investment by IBEF II in Intec Capital was sourced through such channels in March and efforts are country underway to take the company private.

Another INR350 million has been committed to Magicrete Building Solutions, a Surat-based manufacturer of autoclave aerated concrete (AAC) blocks.

"These blocks are replacing traditional bricks in construction and we've seen a huge growth in terms of demand. It has seen compound annual growth of more than 50% and this is expected to continue for the next 5-10 years," Tulsyan elaborates.

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• Topics
• South Asia
• Fundraising
• Funds
• India
• Motilal Oswal Private Equity
• Fundraising
• Growth capital