India's True North to target local LPs for Fund VII

Divya Sehgal, a partner at the firm, told Mergermarket, AVCJ’s sister publication, that no attempt had previously been made to access local investors “in a structured manner to raise a material amount of money.” True North closed its sixth fund on USD 560m in 2019, having initially sought USD 1.1bn.

Sehgal didn’t disclose the target size for Fund VII, merely saying that the firm planned to deploy nearly USD 1.5bn over the next three years, including LP co-investment. In each of the Fund V and Fund VI cycles, co-investment opportunities of USD 1bn were offered to LPs. In Fund V, the take rate was nearly 50%. It was lower for Fund VI with deployment coinciding with COVID-19.

Global LPs have contributed 95% of capital to date, with the rest coming from a handful of Indian investors that have long-standing ties to the firm. True North will extend its international outreach for Fund VII. Having previously concentrated on North America and Southeast Asia, it will add Japan, the Middle East, and Europe to its marketing footprint.

The increased focus on domestic LPs comes as pools of capital within India are deepening, especially with the easing of the regulations that restricted insurers and private provident funds from investing in private equity, explained Srikrishna Dwaram, another partner at the firm.

“Eventually, we hope to get 25%-30% of our capital needs, as we continue to grow, from domestic investors because their own pools of capital and willingness to invest in alternative assets are increasing. But for this fund, maybe 10%-15% will be a good start,” he added.

True North has invested USD 2.4bn across 60 companies to date. There have also been 34 full exits and 14 partial exits, with an IRR of nearly 25% achieved across the entire portfolio. Fund V has deployed USD 1.1bn and distributions to paid-in (DPI) of more than 1x, said Dwaram.

The firm focuses on consumer products and services, financial services, healthcare, and technology products and services. The goal is to divide the fund evenly across the four sectors, although nearly 60% of Fund VI went into financial services and healthcare.

Fund VII will also prioritise digital-first and digitalisation opportunities within these sectors. Although control transactions have accounted for nearly two-thirds of True North’s historical activity, digital-first deals will be largely minority transactions and smaller in size.

“Because we will be doing digital-first, think of that as close to 14-15 investments, of which 5-6 are digital investments of USD 25m to USD 50m each, and the remaining eight or so are investments into native [traditional] businesses of the usual USD 50m to USD 300m ticket-sizes,” said Sehgal.

True North is also planning to raise INR 10bn (USD 132m) for a structured credit fund, which will invest in mid-market private companies.

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• Topics
• South Asia
• Fundraising
• Buyout
• GPs
• LPs
• India
• True North