CDC focuses on direct investments, debt in India
CDC Group, the UK development finance institution, is changing its strategy in India to focus on direct investments, co-investments and debt, as well as making commitments to private equity fund managers. It will also make investments in early-stage funds.
The move is in line with CDC's announcement earlier this year that it would stop operating solely as a fund-of-funds and resume direct investments. The group said that direct investments and debt will each represent up to 20% of its portfolio by 2015. It also said that its activities would focus exclusively on South Asia and sub-Saharan Africa, which account for 70% of the world's poor.
CDC has so far invested at least $1 billion in 17 funds in India, including Multiples Private Equity Fund, Peepul Capital fund and New Silk Route, LiveMint reported.
Anubha Shrivastava, CDC's managing director for Asia, said ramping up direct investments would allow it to focus more on regions and sectors that are difficult to access. "It will help us focus on areas which will have more of an economic development impact and more specifically within certain regions," Shrivastava added, explaining that CDC would look in particular at eight poorer states as well as running pan-India programs.
The group has in the past invested in companies such as Infrastructure Development Finance Co. (IDFC) and ICICI Bank. It broke off direct investments as part of a reorganization that led to the spinout of Actis in 2004.
The decision to look for more debt deals corresponds to a wider move among India-focused GPs toward debt financing. A number of foreign private equity firms, notably KKR, have set up or invested in non-banking financial companies in order to provide a variety of services - principally mezzanine debt-related - to clients. However, CDC's specific remit is to target small- and medium-sized enterprises that struggle to raise capital through normal channels.
The group made its first investment in an early-stage fund, Seedfund, in 2010, committing $13 million.
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