VCCircle

Exclusive: Italian private equity fund Cape Natixis, which has about €400 million under management, has set up shop in India. The Milan-based fund, which is specialised at the mid-stage and expansion capital private equity investing, has established a representative office in Bangalore, from where it will seek to help its two dozen portfolio companies find acquisition targets or help set up wholly owned subsidiaries in India. This is primarily with the objective of leveraging India’s cost advantage, and tapping the local market.

In an exclusive interview to VC Circle, Cape’s chairman and managing partner, Simone Cimino, said that India was a country the investors could not ignore anymore. Cape’s India journey was via China, where it set up office back in 2002. In China, they created nine manufacturing and distribution subsidiaries for the local market. Apparently, the successful China experience has prompted Cape to come to India. “India is the next market to watch,” said Cimino, who was in Delhi to attend a training workshop organized by Indian Venture Capital Association and European Venture Capital Association.

Cape Natixis was founded in 1999 by Cimino & Associati Private Equity (Cimino’s firm), which holds a majority 51 stake, and French company Natexis Private Equity International (NPEI) which holds 49 per cent. Natexis is also one of the investors in Bangalore-based mid-stage private equity fund Zephyr Peacock. (So Cape India is working out of Zephyr’s Bangalore office, where the former’s India representative Rohit Hegde is based. Hegde will be joined by Cape's partner Ilios Maggi Andreadkis in Bangalore soon).

India Strategy

Cimino, however, said his fund was unlikely to directly invest in Indian companies. But they would look at India opportunity through the lense of their portfolio companies – from a JV, subsidiary or from an acquisition point of view. Cape has a wide range of portfolio investments - from automation to aluminum die casting, from loud speaker to cosmetics, from catering to food, from computer software to fabless chip designing, or from plastic moulding to food and packing.

Cape’s job is to help their portfolio companies go global. They will either use an acquisition strategy, or most probably look at forming a wholly-owned subsidiary or a JV in countries like India and China. Cape will pour more money into these firms to fund these activities. “Our strategy is to find ‘pocket multinationals’, which are champions in their own little industrial niche,” Cimino said, adding, “We want to create value for our companies by increasing EBIDTA.”

What are the industries they will immediately look at in India? There are seven industries they are looking at on a priority basis. Automation is one of them. The others include engineering (metal treatment, gas, pipeline, heat treatment), manufacturing of medical devices (for instance, sterilization equipment for hospitals, or a catharsis infusion technology), and so on. (See Cape's investment portfolio).

Cape Natixis has so far raised five funds. It currently has a €120 million fund, which is almost fully invested. A new €129 million fund is being closed in June, which they will start investing in July. Cape has so far made 35 investments, and has had 18 exits (3 IPOs, and the rest are via trade sale). Cimino claims that the firm has an IRR of 70 per cent. Yes, you read it right, 70 per cent.