IL&FS PE expects to raise $200M for three funds in 4th quarter | VCCircle
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IL&FS PE expects to raise $200M for three funds in 4th quarter

BY  Madhav A Chanchani
The PE firm expects to raise the amount for its Middle East infrastructure fund, a new growth capital fund and a public markets fund.

IL&FS Investment Managers, one of India’s largest PE firms managing assets worth $3.2 billion, is looking to close $200 million in commitments from limited partners (LPs) across its three funds during the fourth quarter. The PE firm expects to raise the amount for its Middle East infrastructure fund, a new growth capital fund and a public markets fund.

“We are seeing a lot of momentum in terms of positive thought process and reforms in the country. The upside in capital markets has triggered uptick in a lot of blue chip stocks but our companies are in mid-market, which still hasn’t seen rally,” said IL&FS Investment CEO, Dr Archana Hingorani, on a recent analyst call after Q3 FY13 results.

Fundraising

IL&FS expects to raise close to $75 million for TARA India Fund IV, a growth capital fund that invests across sectors, as stated in the recent analyst call held by the firm. Earlier reports suggested that the fund was targeting $300 million. Its predecessor, Tara India III, raised commitments of $225 million and invested in companies such as mobile retailer The Mobile Store, laundry chain Jyothy Fabricare, agri-warehousing firm JICS Logistics and Ramky Infrastructure Ltd.

The firm is also looking to raise $25 million for a new fund dedicated to making PIPE (private investment in public enterprises) investments. The PIPE fund will essentially look at investing in companies which are raising money through fresh/primary issues. However, it will be also open to investing in secondary market transactions.

IL&FS also expects to raise $100 million for its Middle East Infrastructure Fund, where it is raising the money with a joint venture partner. The fund has already had commitments of $45 million from the sponsors and senior LPs. IL&FS also has a $658 million pan-Asia infrastructure fund with Standard Chartered Bank and the fund deployment is expected to be completed in this quarter.

According to Hingorani, fundraising has seen very slow progress and exits are the key. The PE firm recently exited Arch Pharmalabs where Japan’s Mitsui & Co acquired over 25 per cent stake for Rs 370 crore. As the markets have picked up, IL&FS PE also expects to start exiting its listed portfolio firms like Gayatri Projects, Den Networks and Gujarat Pipavav.

As for clarity on the tax front, the postponement of GAAR till April 2016 has been welcomed by LPs, but some concerns still remain. According to Hingorani, an aggravated fall last year in Indian currency, coupled with lack of exits, increased concerns among LPs.

Results

IL&FS Investment Managers reported 5.9 per cent rise in consolidated net profit to Rs 19.7 crore for the third quarter ended Dec 31, 2012, compared to the year-ago period. Its revenues, however, were almost flat at Rs 56.2 crore. The firm would expect to maintain the pace of the third quarter in Q4 as well, said Hingorani. The rise in profit was driven by cost control, lesser amortisation for placement agents and lower debt service burden. She also added that IL&FS PE’s revenue line had been protected by increase in exchange rates as most funds under management are in dollars.

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