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India Value Fund Closes Fund IV At $725M

07 July, 2009

In a difficult fund raising environment, leading Indian private equity fund India Value Fund Advisors (IVF) has closed at $725 million for its fourth fund. When contacted, a spokesperson for India Value Fund Advisors confirmed the development to VCCircle.com. He refused to

comment further.

In this period of tight liquidity and limited partners (the investors in private equity funds) backing out of commitments, achieving the close of a fund of this magnitude for Indian market is significant.

PEI Asia, a private equity tracker based in Singapore, first reported that IVFA has achieved the close of its fourth fund.

The fund close comes at a time when the markets, although recovering, still remain cautious. The competition for fundraising is also tough. There are 78 India-focused funds on road looking to raise $24 billion, according to data by Prequin, a UK based fund tracker.

There are about 117 pan-Asia private equity funds – which have India as one of its geographies – on road currently targeting to raise an aggregate capital of $59.2 billion.

Some of the major India-focused funds that have managed to close this year are NYLIM Jacob Ballas Capital, Actis and Avigo Capital Partners. IL&FS Investment Managers, who was able to announce final close of both its real estate and growth equity funds, had a mixed response to

its funds.

While its real estate fund raised $895 million, exceeding target of $750 million, its growth equity fund had to close at $225 million, way short of its $400 million target.

Actis, which focuses on emerging markets, raised $2.9 billion, of which around $1 billion is expected to come to India. NYLIM Jacob Ballas raised a $440 million growth fund, while Avigo Capital and CX Partners were able to announce the first close of their funds.

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Buying Controlling Stakes

IVFA, which manages $610 million across its three previous funds, usually buys controlling stakes in the companies it invests in. The firm also has a strategy of appointing business managers on the boards of its portfolio companies in order to have a better control over the

running of these firms.

Some of the earlier companies it invested, turned around and exited are Shringar Cinemas (now called Fame India Ltd), Trinethra Superretail Ltd, and TTK Healthcare TPA Pvt Ltd. Its current portfolio includes 11 companies such as Music Broadcast Pvt Ltd (runs Radio

City), V-Link Travel Solutions Ltd (Meru Cab), and DM Healthcare (Kerala-based hospital chain).

In May this year, the fund picked up more than 51% stake in private container trains operator Innovative B2B Logistic Solutions (Inlogistics) for around Rs 200 crore. It had also recently picked up a controlling stake in the Bangalore-based Atria Convergence Technologies (ACT TV), which launched IPTV services in the city in Februrary this year, for Rs 450 crore.

IVFA has a sector agnostic approach, however, the key sectors that it plans to invest from its fourth fund include pharmaceuticals and healthcare, retailing and supply chain management, outsourced services and media and entertainment.

IVF had closed its third fund at $400 million in January 2007. A 30% of the third fund is yet to be deployed. Prior to this, IVF had closed its second fund in 2005 at $175 million. The firm’s first fund was a $35 million fund which it closed in 2000, when it was established.

The fund was set up as a joint venture between Housing Development Finance Corporation (HDFC), Ambit Corporate Finance and former G E Capital chairman and CEO, Gary Wendt. Delhi-based real estate investor Gaurav Dalmia is also one of the sponsors of IVFA.

(With inputs from Ruchika Sharma


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3 Comments
Skeptic . 6 years ago

All these funds keep raising hundreds of millions of dollars, but it begs the question – where on earth are there so many investment oppotunities? It is a known fact that there is just too much money sloshing around and the only way some sanity will return is if some of these PE funds just SHUT SHOP so that valuations stabilize from their current unjustifiable levels and returns to end investors are reasonable and sustainable.

Another skeptic . 6 years ago

You cannot really blame the PE funds. Rather, the LPs that keep funding such funds are to be blamed for this. They should just pull the plug on a few of them like they are doing with VC funds in the US.

Ankur B . 6 years ago

I wonder who is this ‘Skeptic’ in Comments! There is a sea of investment opportunities in the world if anyone cares opening their eyes and minds.

His comments will sound especially painful to those entrepreneurs who are running from pillar to post to raise funding. I myself have at least two excellent investment opportunities.

The problem of low returns is not due to lack of good proposals or lack of entrepreneurs or high valuations. The fundamental problem is with the VC/PE mindset. It is really a tough task for an entrepreneur to make them see the obvious. Most of them live in their own world of assumptions and trends. Most VCs/PEs tend to go with the herd rather than actually applying their minds to proposals.

As a result, the proposals that tend to flow with the trend receive overly high valuations and those with real innovation and potential are left unfunded. Not investing in a good opportunity is as much a loss as investing in a bad opportunity.

The herd mentality was there for everyone to see when they invested in real estate and dot coms.

Investors have many lenses on their eyes that prevent them from seeing clearly. First is their self assumed superiority over entrepreneurs. Second is their success in raising funds from end investors. Third is their past successes. Fourth is their tendency to make speeches and to stand at pedestals.

There are millions of successful businesses in our world that support our modern life styles. Yet, the investment professionals tend to assume that only 1% proposals are worth investing. Among the 99% rejected proposals, they leave out 20% good ones and pick up a limited number which they over-value getting carried away by trends.

India Value Fund Closes Fund IV At $725M

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