ChrysCapital closes fund VI at $510m

ChrysCapital has announced a final close of its sixth fund on $510 million. The fund, which was launched last year, is a little more than half the size of the Indian private equity firm's previous vehicle, which returned $300 million of capital to LPs in 2010, bringing its corpus down to $960 million.

"There's just too much competition," said Managing Director Gulpreet Kohli, explaining the decision to go smaller. "All the big boys are there. Because of the size of the fund, we're now trying to avoid doing larger deals."

ChrysCapital VI will instead concentrate on making investments with a $20-100 million equity ticket, with most falling into the $30-50 million bracket. It will focus exclusively on growth capital transactions in India, taking equity stakes ranging from 5-45%, although the occasional buyout is to be expected. Three to four deals will be realized per year, around 12-14 in total, and while some of these will involve co-investment with other investors, Kohli stresses that this is not ChrysCapital's intended strategy.

Target sectors include infrastructure (construction, building materials), niche manufacturing (not commodities or textiles), IT, consumer, pharma, healthcare and financial services.

Post Dhawan

Apart from being more modest in size than its predecessor, this latest vehicle is notable as the first ChrysCapital has raised without Ashish Dhawan at its head. Dhawan, the private equity firm's founder and senior managing director, announced last year that he would leave the industry in July 2012 to help address social issues in India. This didn't distract ChrysCapital's six remaining managing directors from closing the fund at its hard cap and exceeding the initial target of $400-500 million - and all through one close and without the help of a placement agent.

"We've had a very high proportion of exits. ChrysCapital has exited more than 35 companies since it was set up," Kohli says by way of explanation for their success. "So I would say it's the stability of the team and the exit track record."

Domiciled in Mauritius, ChrysCapital V will have a lifespan of 10+1+1, having been structured by law firm Cooley in the US and Luthra & Luthra in India. The fund administrator is International Fund Services. At 2% and 20%, the management fee and carried interest are in line with the industry standard, while the minimum subscription accepted from LPs was $10 million. The entire fund will be used for new investments, as opposed to follow-on rounds.

The fund, which has a cornerstone investor, received half of its investment from US endowments and pension funds, and half from sovereign wealth funds and institutions based in Asia and Australia. This contrasts with Fund V, which attracted 75 investors - one third of which hailed from the US, one third from Asia and another third from the UK. VCCircle reported last November that the main backers of Fund VI - out of a total of 30 - were the Harvard Management Company, Asia Alternatives, and Singapore-based Adam Street. Kohli claims most of the LPs in Fund V re-upped to Fund VI.

In addition to Kohli, who used to work at General Electric, ChrysCapital's managing directors are Ashley Menezes, who previously worked for KPMG; Kunal Shroff, formerly of hedge fund Chilton Investment Company; Ravi Bahl, who worked at Citibank; Sanjiv Kaul, a former executive of pharmaceuticals giant Ranbaxy; and Sanjay Kukreja. Their team also consists of three directors, two vice-presidents and three associates, and the plan is to hire 2-3 additional associates over the coming months.

Exits matter

ChrysCapital's previous vehicle, fund V, performed an unprecedented move in Asian private equity when it returned $300 million to investors two years ago. It cited a poor market climate and limited opportunities during 2009, as well as the need to sustain a consistent 15%-plus IRR as its motivations. Prior to that, in 2005, it held a final close on $550 million for ChrysCapital IV, and in 2004 it closed Fund III on $258 million, with Harvard Management Company and Stanford Management Company both providing capital. The $127 million ChrysCapital II and $64 million Fund I were raised in 2000 and 1999 respectively.

The private equity firm has exited all the investments made from its first two vehicles, while exits from several investee companies in the third fund and around half the portfolio in the fourth are yet to be realized.

As Kohli says, following the low returns on investments made during 2007, it is exits that ChrysCapital's competitors in the market most urgently need if they are to restore LPs' faith in Indian private equity. Only 25 of the 52 fundraising announcements made last year have resulted in fund closes so far, suggesting that more than a few managers are struggling amid the tough market conditions and the continued dearth of a local LP base.

"The biggest challenge most fund managers in India will have is their track record," says Kohli. "A lot of managers will have to look at how many companies they have exited. Only the better funds are getting funded right now - it's hard for newer emerging managers to get funded."

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• Topics
• Venture
• South Asia
• Fundraising
• ChrysCapital Management
• Fundraising
• India