Aion makes India breakthrough

A majority of respondents in a PE industry survey by business advisory firm AlixPartners expect more corporate restructuring in India over the next 12 months. Aggressive investments made in 2007-2008 are seen as especially vulnerable.

"India's economy is slowing and the rupee has dropped more than 20% in the last year. This has created problems for local companies, including PE portfolio companies in terms of generating adequate margins from their business," said C.V. Ramachandran, AlixPartners' Asia president.

Against this backdrop of challenging commercial conditions, and weaker confidence in the growth equity model that has characterized Indian PE, Aion Capital Partners - a joint venture between Apollo Global Management and ICICI Venture - raised $825 million for its debut special situations fund. According to AVCJ Research, the vehicle launched in early 2013 and soon arrived at a $325 million first close. It then kicked on and sped past the initial target of $500 million.

It is the largest India-focused fund raised since WestBridge Crossover Fund, an evergreen vehicle without a specific investment cycle, added a further $325 million to the $525 million raised in 2011. Both could be described as contrarian but in very different ways. While WestBridge Capital has a fund structure it feels serves the needs of a PIPE deal-focused remit, the Aion approach is rooted in flexibility.

"You have a situation where private equity funds in India have been focused on just a few sectors and industries and there is a reluctance to enter businesses that might face cyclical downturns, which reduces the opportunity set," a source close to the firm tells AVCJ. "Aion wants to provide truly flexible capital, whether debt, equity or hybrid instruments."

Aion's target areas within special situations are identified as financial restructurings, recapitalizations, leveraged buyouts and promoter financings. It is thought that bespoke financing solutions developed in partnership with Aion can help companies meet their long-term capital needs. Borrowing costs remain relatively high in India and Aion expects them to remain elevated for the foreseeable future.

More than $100 million has already been invested from the fund. Disclosed deals include a commitment to Jyoti Structures, which takes on engineering projects in the power sector. The listed company wants to stabilize its business in India and increase its overseas presence, particularly in the US.

"What we have seen is Indian companies recognizing the benefit of being able to access a wide range of financing through the Apollo-ICICI network," the source adds. "They are a lot of different resources they can tap into."

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• Topics
• Credit/Special Situations
• Fundraising
• South Asia
• India
• Fundraising
• Distress
• Aion Capital Partners