A top investment banker and a head of India-focused private equity firm have joined former Warburg Pincus managing director Rajesh Khanna (in pic, right) to start a new private equity fund Arka Capital. KPMG Corporate Finance's Rohit Kapur and Helix Investments Director and Head of India Investments Cyrus Driver are joining Arka as managing directors, sources close to the development told VCCircle.

Khanna, the former India head of Warburg Pincus, will be the sponsor and head of the fund, which is targeting a corpus of around $400 million for its debut fund, said the sources. The firm is currently setting up its operations and the fundraising is likely to start by second quarter (Apr-Jun) of 2011.

Khanna has spent more than 15 years with PE major Warburg Pincus before he quit earlier this year to start his own fund. He was a managing director at the time he left the firm, and Max India Ltd and Moser Baer India Ltd still count him as director on their boards. Khanna, along with Pulak Prasad, who set up his own fund Nalanda Capital, were credited for their investment in Bharti Televentures, which is considered as the best PE exit in India's short alternative investment history.

Khanna, Driver and Kapur could not be reached for comments at the time of posting this article.

VCCircle reported last week that Rohit Kapur, Executive Director and Head of India at KPMG Corporate Finance, had quit. Kapur had declined to comment on his future plans at that time.

Driver (in pic, right) has been leading India investments for PE firm Helix before which he was with J.P. Morgan Partners Advisors in Singapore and Mumbai. Driver, who led both growth capital and buyout deals at Helix for past 4 years, is currently believed to be in a transition period from the firm. He led Helix's investments in education sector like MT Educare (India’s largest school tutoring chain) in 2007 followed by Learning Mate (e-learning company). The most recent deal was the management buyout of power electronics player Hi-Rel Electronics Pvt. Ltd in September this year.

Driver also founded a health food startup called Calorie Care in 2004, which is now one of the leaders in the niche segment of health food services. He is a graduate of IIT Bombay and IIM Ahmedabad.

Kapur (in pic, right) has worked with KPMG Corporate Finance for a total of eight years in two stints. He drove businesses like M&A advisory, business sales and disposal, valuation services, private equity advisory, debt syndication among others which came under the corporate finance group.   (Clickhere for our earlier story)

Khanna's Arka, which means sun in sanskrit, comes as limited partners are increasingly looking at independent fund managers with proven track records. A number of private equity fund managers, who were working in captive funds or in overseas funds, have started their owns shops since 2009 in India. Few like Ajay Relan-led CX Partners and Renuka Ramnath's Multiples, who started out early, have successfully raised funds but the environment continues to remain challenging. While CX Partners closed the fund at $515 million in July, Multiples had first close at $250 million and expects final close at $500 million in December.

Also, LPs are looking to back strong teams rather than just individuals. Several independent managers have also started building up teams. Former partner at Baring Private Equity Partners India N. ‘Subbu’ Subramaniam roped in two partners for MCap Fund Advisors - Citigroups chief risk officer Rahul Gupta and former DTZ director Abhilash Lal.

Pravi Capital, founded by former ICICI Venture veterans Jayanta Banerjee, Anand Vyas and Sunay Mathure, added Lehman's Tapan Gandhi as Principal - Investments. Pravi is targeting a fund of $200 million.

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