Investcorp seeks $400m for India private equity fund
Investcorp is targeting USD 400m for its third India private equity fund as part of efforts to quadruple its assets under management (AUM) in the country to USD 2bn within six years.
The Bahrain-headquartered investment manager – which entered India in 2019 through the acquisition of IDFC Alternatives’ private equity and real estate businesses – has applied to the Securities & Exchange Board for India (SEBI) for approval to launch the fundraising process.
The goal is to raise half the corpus from global institutional players and then 25% apiece from domestic investors and family offices in Gulf Cooperation Council (GCC) member territories, Harsh Shethia, a managing partner and head of Investcorp India, told Mergermarket, AVCJ’s sister title.
The firm’s debut India private equity fund was a top-up of IDFC Alternatives’ second vehicle, which launched prior to the acquisition. Investcorp more than doubled the size to more than USD 140m. The successor fund of around USD 160m was sourced entirely from Investcorp’s balance sheet on a deal-by-deal basis. Deployment started 18 months ago.
“Now that we have a bit of a track record in India, we feel it is time to launch products that attract both domestic and foreign capital,” Shethia added.
While Fund I was predominantly consumer and healthcare, and Fund II focused on technology, Fund II will have four key verticals: consumer, healthcare, financial services, and technology. Investcorp will participate in growth-stage rounds, typically Series C onwards, and write equity cheques in the USD 25m to USD 40m range.
“Within one year of being in India, we realized that we were missing out on technology,” said Shethia. "After the first COVID-19 wave hit India, our strongest conviction became that e-commerce is going to be huge, so significant focus went into funding companies in that space.”
Investcorp has completed 13 deals in India to date. Recent investments include drug manufacturer V-Ensure Pharma Technologies, food delivery platform FreshToHome, B2B e-commerce software developer Unilog Content Solutions, and two rounds for logistics start-up Xpressbees.
IPOs will become the most prolific exit route, reflecting a strategy – from Fund II onwards – of targeting larger businesses that are more public markets-ready, Shethia said. He added that secondary sales are a likely mode of exit for smaller positions held in Fund I.
The two real estate funds Investcorp inherited from IDFC Alternatives are both credit-centric. The portfolio comprises 26 residential projects and has a value of USD 200m. Investcorp wants to fully exit these positions in the next 12 months. Shethia noted that a private debt strategy is under consideration.
As of year-end 2021, Investcorp had USD 40.4bn in AUM. Three of its 13 offices globally are in Asia, including bases in India, China, and Singapore.
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