Motilal Oswal PE to raise up to $300 mn in new fund

The private equity arm of Motilal Oswal Financial Services Ltd is looking to raise $250-300 million for a growth capital fund to invest in small to mid-sized companies, a top executive said on Wednesday.

The new fund will be the firm’s third and its theme will be similar to the previous two funds, said Vishal Tulsyan, CEO of Motilal Oswal Private Equity.

Tulsyan told VCCircle the firm is finalising details such as roadshows and anchor issue size for the third fund. The firm has also been focusing on adding operating advisers to the investment team, he added.

The new fund will look for deals in a range of $18-20 million, Tulsyan said. That’s higher than the firm’s average investment size of $8.5 million for the first fund and $13-14 million for the second.

Founded in 2006, the Mumbai-based PE firm raised its first fund of $125 million in 2007-08 and the second fund of $155 million in 2011. International investors committed $105 million to the second fund while domestic investors contributed the remaining. A significant portion of the capital was raised from institutional investors, including several marquee international investors.

News of the third fund was first reported by The Economic Times. Tulsyan said in the report that the first fund made an average of 2.5x return and that the PE firm hasn’t yet started exits from the second fund.

The PE firm has $325 million under management and provides finance to mid-market companies. It seeks to invest in sectors such as food processing, retailing, lifestyle and leisure, consumer durables and electronics, information technology, logistics, financial services, education, business process outsourcing, media and entertainment, construction and real estate. It typically invests between $5 million and $15 million.

The second fund invested in companies such as Arinna Lifesciences, GR Infraprojects Ltd, Glass Wall Systems India, India Energy Exchange and Intec Capital. It recently exited Parag Milk Foods Ltd when the dairy company went public.

Its first fund invested in companies such as Au Financiers, Kurlon, Power Mech Projects and Shubham Housing Development Finance Company.

Motilal Oswal PE joins a clutch of private equity firms floating new funds to invest in mid-market companies. Multiples Alternate Asset Management Pvt Ltd is on the road to raise $550-600 million in its second fund that will invest in mid-market companies while Carpediem Capital Partners has raised bulk of the target amount in its debut mid-market-focused PE fund.

Paragon Partners said in March it raised $50 million in commitments to mark the first close of a PE fund that seeks to provide growth capital for mid-market companies. In October last year, mid-market India-focused PE firm Lighthouse Funds raised $138 million for its India 2020 Fund II.

Former Goldman Sachs’ executive Vishal Bakshi is the latest to join the bandwagon after he quit the investment banking giant to float mid-market PE firm Avatar Growth Capital Partners.

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