Avendus PE Investment Advisors Pvt. Ltd., a subsidiary of Avendus Capital, on Monday launched its third PIPE (Private Investment in Public Enterprises) fund– Avendus India Opportunities Fund III with an expected size of Rs 500 crore ( $94 million).
The fund, with an investment horizon of 2 to 3 years, would invest in 12-14 “high conviction” midcap stocks, taking equity stakes of around 5 per cent, said the company.
The fund is registered with SEBI as Alternate Investment Fund (AIF) in Category III and would use a private equity approach to invest in high quality listed midcap companies.
Manoj Thakur, CEO, Avendus PE Investment Advisors, said, “The key differentiation of the fund is its active engagement style. There is major scope to improve investor relations and corporate governance of midcap companies. We identify potential winners in the midcap space and help them in their pursuit of becoming highly regarded companies by the investor community.”
This approach entails in-depth primary research, management interactions and thorough commercial due diligence prior to investments, he added.
The Fund’s current investment includes Action Construction Equipment Ltd, Gujarat Apollo Industries Ltd, Kokuyo Camlin Ltd, Nilkamal Ltd, Pratibha Industries Ltd, Transformers & Rectifiers (India) Ltd and Value & Budget Housing Corporation Pvt Ltd.
“There are 3,000 regularly traded companies in India, of which more than 2,800 have a market capitalisation of less than Rs 5,000 crore. Outside the top 200 companies, majority of the companies are under-researched, creating immense opportunity for a fund willing to undertake in-depth evaluation,” it added.
The fund would focus on sectors which benefit from India’s rising discretionary spending, rapid urbanisation and increasing rural prosperity.
The past two funds of Avendus PE Investment Advisors have outperformed the broader indices. The first fund, launched in September 2009 has given compounded annualised returns of 19.4 per cent since inception, as compared to the BSE Small-cap Index’s return of 2.7 per cent and NIFTY return of 5.8 per cent.
The second fund, launched in January 2011, has given compounded annualised returns of 21.9 per cent since inception as compared to BSE Small-cap Index’s return of -3.3 per cent and NIFTY return of 5.9 per cent, the company said.
(Edited by Prem Udayabhanu)