Kotak PE eyes $300M in third sector-agnostic fund

Kotak Mahindra Bank's alternative investment arm Kotak Private Equity has floated its new sector-agnostic PE fund, six years after it raised $300 million in its second such generalist fund. The new fund also has the same target corpus but includes an upward ceiling of $400 million, to factor in any over-subscription.

International Finance Corporation (IFC), the private sector lending arm of the World Bank, will invest up to $25 million in Kotak India Private Equity Fund - III (Kotak III), it said.

IFC makes both direct equity and debt investments in India besides investing in India-focused PE/VC funds. This is IFC's second such commitment to an India-focused PE fund in the last one year. Last September, it had committed up to $50 million to India and Southeast Asia-focused PE firm Everstone's new fund which has a target size of $650 million.

Kotak Mahindra Bank's Mauritius-based arm Kotak Mahindra (International) Ltd will serve as the investment manager to the new PE fund and it may appoint Kotak Investment Advisors Ltd to provide non-binding advisory services.

Meanwhile, Kotak III will be the successor to Kotak's two generalist funds and a sector fund since 2005. The financial services firm had raised India Growth Fund I, a $160 million vintage fund (2005), India Growth Fund II (together with offshore funds), with a corpus of $300 million (2009) and sector-focused Life Sciences Venture Fund, a $68 million fund (2007).

The new fund will invest in equity and equity-linked instruments of companies that have significant operations in India with focus on pharmaceutical, life sciences, healthcare, consumer, technology and financial services sectors.

Although it is sector agnostic, up to 60 per cent of its corpus would be invested in pharmaceuticals, life sciences and healthcare space. This would be followed by selective investments in financial services, consumer products and technology companies.

Of its Growth Fund I, Kotak has made around two dozen investments and exited/part-exits from its six portfolio firms while Growth Fund II has made only half-of-a-dozen investments, according to VCCEdge, a research platform of VCCircle.

Manipal Hospitals, Natco Pharma, NSE, Muthoot Finance, MCX and Godrej Consumer Products are among its portfolio firms (including those which it has exited).

Kotak also has a realty PE funding business. It had raised $400 million in its second offshore realty fund a year ago, taking the total corpus of its realty funds to around $1 billion and total assets under management to around $1.3 billion.

It is separately looking to raise around $250 million in a new realty fund from domestic investors.

Although PE funds in India have had a patchy history in terms of showing returns to their own investors or Limited Partners (LPs), they have been relooking at the market after the new government took over a year ago. A bunch of PE firms has raised or is on the road to raise new funds.

Last month, India Value Fund Advisors (IVFA) said it has raised $500 million to mark the first close of its new fund Indium-V and added it is looking to complete the fundraising within three months with a total corpus of $700 million.

Multiples Alternate Asset Management has raised $400 million from international investors for its second fund and has also raised the target size of the new fund by a fifth to $600 million.

CX Partners is looking to raise $400 million and ICICI Venture, the private equity arm of India's largest private sector lender ICICI Bank, is eyeing $500 million in its fourth sector agnostic PE fund.

In the healthcare space, which is going to be the thrust area for Kotak III, growth-stage healthcare focused private-equity investor Asian Healthcare Fund is looking to raise as much as $150 million in its second fund.

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