Motilal Oswal Private Equity Advisors Pvt Ltd, the private equity arm of the domestic broking major, Motilal Oswal Financial Services Ltd, has formally launched its fund II and is targeting a corpus of $175 million, a top official of the company told VCCircle. The size of the second fund is higher than that of the firm’s first fund of $125 million. Post this fund-raise, the total assets under management for it private equity business would reach $300 million.
The PE fund hopes to make a formal close with about $70-$80 million by August-September this year. The firm is looking at raising the majority of the corpus (up to 70 per cent) from the domestic markets, comprising both financial institutions and retail investors. After receiving commitments from the domestic LPs (institutional investors who invest into PE funds), the fund will also look at tapping the international markets.
Domestic LPs comprise of financial institutions like banks, insurance companies, pension funds and HNIs (high networth individuals). The biggest domestic LPs in India are General Insurance Corporation, Life Insurance Corporation, State Bank of India and UTI. These institutions are allowed to invest a small percentage of their assets under management in private equity. Increasingly, the captive arms of the well-established corporates in India are raising money in the domestic markets by leveraging their domestic corporate brands.
At least a dozen Indian funds such as ICICI Ventures, Reliance Private Equity, Renuka Ramnath-floated Multiples, Milestone Religare Investment Advisors Pvt Ltd, IL&FS Investment Managers Ltd, Kotak Realty Fund, Tata Capital and Piramal Real Estate fund have raised significant amounts of capital from domestic markets.
The domestic HNI class is also gaining traction with placement agents actively reaching out to them. On the HNI side, Motilal Oswal PE will not look at taking commitment below Rs 1 crore a pop. “This is more like semi-institution money. We will not lower the bar below a crore,” Vishal Tulsyan, CEO of Motilal Oswal Private Equity, told VCCircle in an interview.
The firm is currently managing and advising India Business Excellence Fund (2007-2008 vintage), a sector agnostic fund with a corpus of $125 million from both Indian and overseas investors. The fund has invested in 13 companies till now and stands fully committed as of date. Even though the fund is yet to show any exit, the private equity firm is confident of raising its second fund. “In India, PE is at a very nascent stage and you have seen heightened PE only in the last 4-5 years. So, it would be unfair to evaluate on the basis of exits,” says Tulsyan.
According to him, the unique feature of the fund is the fact that they have gone beyond the metro cities and have developed a network of small, boutique i-banks in the country – mostly in the Tier II and Tier III cities – thereby making them very strong on the deal sourcing side. Besides, the private equity firm has also been the first institutional investor in most of its portfolio companies.
“What we have created in the last four years, in a very consistent, methodical and a patient way, puts us in a good step to raise our next fund,” Tulsyan adds.
From its first fund, the private equity firm has invested in companies like ElectroMech Material Handling Systems India Pvt Ltd (Industrial Machinery), Minda Industries Ltd (Auto Parts & Equipment), AU Financiers India Pvt Ltd (Consumer Finance) and Parag Milk Foods Pvt Ltd (Packaged Foods & Meats), to name a few. A few companies like Resurgere Mines & Minerals India Ltd (Steel) and Time Technoplast Ltd (Specialty Chemicals) have seen liquidity events with their IPOs. Tulsyan added that they are likely to make a couple of exits this year.