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Tata Capital is looking at creating various funds under themes like mid-market, healthcare and innovation.

Tata Capital, the financial services arm of the conglomerate Tata Group, has managed to mop up Rs 750 crore for its debut special situations fund. Tata Capital Special Situations Fund, which managed to make its first close in December 2009, will be a turnaround fund targeting investments in unlisted companies in the manufacturing sector. The fund would look at small-to-medium-sized companies which are in a distressed situation.

At present, there are select funds and arms of overseas banks that operate in the special situations space in India. But, very few of these existing funds have SME sector turnaround stories as their investment themes. Special situation, especially distressed investing, is still a nascent business in India with few players like WL Ross, ADM Capital, Clearwater Capital, Eight Capital and units of foreign banks like Standard Chartered.

One private equity observer said, the catchment would be huge as India's manufacturing ecosystem has thrown up several SME assets in distress due to excessive leverage, poor working capital management and unforeseen business fluctuations.

The Special Situations Fund is likely to make an investment of around Rs 100-150 crore to pump in fresh equity in companies. The firm has also managed to rope in International Asset Reconstruction Company Pvt Ltd (IARC), where it has a 20% stake, which will buy the debt of portfolio companies. Other major shareholders in the asset reconstruction firm are HDFC Bank, City Union Bank, ICICI Bank, among others.

The fund will be lead by TA Ramkumar, who was earlier vice‐president &secretary of Tata AutoComp Systems. Ramkumar has been with the group for over 14 years and has also worked with companies like Voltas India and BASF India. An e-mail sent to Ramkumar did not elicit any response at the time of filing this story.

When contacted, a Tata Capital spokesperson declined to comment. But, a source added, the Special Situations Fund attained closure two months back, in December 2009, at Rs 700 crore to Rs 750 crore.

This would be one of the first third party PE fund to be closed by Tata Capital since it announced its foray into the business. The firm has currently launched the $350-400-million fund, which it plans to close in five to six months. Tata Capital is looking at creating various funds under categories like mid-market, healthcare and innovation.