Blue River Capital, a Mumbai-based PE firm, is in the process of raising its second fund (Blue River Capital II), a $200-million offshore fund in the near future. The fund-raising and investment plans of the company had hit a roadblock when it was in the midst of termination of agreement with partner Edelweiss Capital. It is learnt that the process of Edelweiss exit was completed last month.
Blue River Capital, which manages a fund of $140 million, has invested a lion’s share of the corpus since 2006. The firm was founded in 2005 by Shujaat Khan, former managing director, ChrysCapital and Muneesh Chawla, former CEO of IL&FS Investment Managers, the private equity arm of IL&FS, in partnership with Edelweiss Capital. The separation of Edelweiss from the partnership had been in the news for a while, and has been completed last month, according to sources. Edelweiss was a minority shareholder with 40% stake in Blue River. It is believed that subsequent to the Edelweiss exit, Shujaat Khan and Muneesh Chawla will be the only shareholders.
According to sources, Blue River is likely to raise its second offshore fund in the next 6-12 months with the similar strategy of targeting emerging middle market companies for growth capital. The second fund will continue on the same lines as Fund I, to focus on investments up to $25 million in growth companies. The plan, according to sources, is to strengthen its team by appointing two to three senior professionals and start fund-raising immediately. It is learnt that the senior appointments are likely to be at the principal or partner level. When contacted, Shujaat Khan declined to comment.
In recent times, there have been several cases of PE firms and teams spinning out or terminating their relationship with investment banks. The reasons have varied from addressing conflict issues in decision making to the problems faced by banks with regulators, added the source. Also, international limited partners seem to prefer the independent model due to the complete alignment with the PE firm and its team members rather than an institution which may have other priorities and objectives.
Now, with a recovery in the global markets, more and more Indian PE firms are in the process of fund-raising. ICICI Venture, the private equity arm of lender ICICI Bank, plans to launch a $500-million fund and Rs 1,000-crore real estate fund this year. Similarly, Indiareit Fund Advisors, promoted by the Piramal Group, is in the process of raising Rs 750-crore Indiareit Domestic Fund Scheme IV including green shoe option of Rs 250 crore.
IL&FS Investment Managers Ltd (IIML) also plans to raise its latest sector-agnostic fund, Tara India Fund IV, at $400 million. Motilal Oswal Private Equity Advisors Private Limited, the PE arm of Motilal Oswal Financial Services Limited, also plans to raise its third fund, India Business Excellence Fund (IBEF) 2, of Rs 1,500 crore.
Blue River’s investments in portfolio companies include Wilson Sandhu Logistics (Rs 45 crore), City Union Bank Ltd (Rs 30 crore), Rane Holdings Ltd, KMC Constructions Ltd (Rs 90 crore), International Print-o-Pack Ltd (Rs 55 crore) Aurangabad Electricals Ltd (Rs 50 crore) and KPR Mills Ltd (Rs 45 crore). The firm is in talks to make strategic sell-out in a few of its portfolio companies.