Indian GPs see opportunity amidst chaos - AVCJ Forum
Indian GPs expect the current vintage of country funds to enjoy a favorable investment climate as valuations moderate and competition for deals eases, even though they acknowledge that LP sentiment in many cases remains weak.
"Most people think India sucks," Sameer Sain, co-founder and managing partner at Everstone Capital, told the AVCJ Forum in Hong Kong.
"It sucks so much they don't want to talk about it. At first they said they were very concerned, that was replaced by anger and venom and now it's just a glazed look. But we closed our second industrial warehousing fund oversubscribed with some of the highest quality LPs you can imagine."
He cited differentiation and a realistic fund size as the key factors in deciding the success of a fundraise. While Kedaara Capital last week announced a final close on its debut India vehicle of $540 million - exceeding the $500 million target - he estimates that 90 other GPs will fail to attract capital, with extinction rather than consolidation the order of the day.
"There will be a separation of the men and the boys," added Bobby Pauly, a partner with Tata Capital's Tata Opportunities Fund, which closed earlier this year at $600 million, with fewer than 10 LPs committing capital. "Unless you have a sustainable differentiated proposal then you will not survive."
For those that have dry powder, deal-making is already becoming easier now fewer GPs are active in the market and with India facing macroeconomic headwinds. Sain identified healthcare and education as two sectors in which Everstone is particularly interested because they are closely aligned with developments in consumer demand.
Tata Opportunities Fund, meanwhile, sees potential in the infrastructure space and is currently involved in the roll-up of portfolio of toll road assets.
"There are many sellers in the market and we see opportunities to buy assets below cost," Pauly explained. "We can get a private equity style return - 2-3x - if we use the right financial engineering. We can get into things that were historically not possible."
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