Tata Opportunities Fund team targets spin-out

Paddy Sinha (pictured), TOF’s managing partner, has already announced he is leaving the firm, merely saying that he plans to stay in private equity and Tata Capital is supportive of his decision. According to a source familiar with the situation, this is the first step of an intended spin-out by the entire team. Another source noted that numerous details need to be addressed before any such move is made.

Fund II is already in the market with a target of $600 million and was said to be nearing a first close when Tata Capital resolved to pull out. It is unclear why the sponsor no longer wanted to continue with TOF. Tata Capital also has funds focusing on growth capital investment, early-stage deals, healthcare, and special situations. It is suggested that it no longer wanted to proceed with both a growth capital series and the growth and buyout strategy pursued by TOF.

Fund I spent approximately two years in the market before closing at $600 million in May 2013, having originally set out to raise $1 billion. Nevertheless, it was at the time one of the largest-ever debut funds with an India mandate. There are fewer than 10 LPs, comprising sovereign investors, financial institutions, global corporates and high net worth families. Investors are said to include Korea Investment Corporation (KIC), Temasek Holdings, and subsidiaries of Mitsubishi Group and Mizuho Financial Group.

The team targets investments of $30-200 million, mobilizing co-investment for the larger transactions. In addition to capital, portfolio companies benefit from exposure to the Tata Group’s global network and industry best practices. Fund I made eight investments: Ginger Hotels, Tata Sky, Varroc Engineering, Shriram Properties, TVS Logistics, Tata Projects, Fincare, and Uber.

There have been two full exits. Uber was sold following its US IPO, while auto components manufacturer Varroc Engineering went public in 2018. The offering raised INR19.6 billion ($285 million), of which INR17.8 billion went to TOF. It invested INR3 billion in the business in 2014. In rupee terms, the private equity firm secured an IRR of more than 50% and a 6x multiple.

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