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WestBridge adds $325M to Crossover Fund, sitting on $500M dry powder

14 February, 2014

WestBridge Capital Partners expects to continue its aggressive investment pace after adding another $325 million to its public markets focused fund. WestBridge Crossover Fund’s corpus now stands at $825 million after the firm raised more capital in September 2013 after its initial $500 million raise in 2011.

“In WestBridge Crossover Fund, it’s a single pool of capital in an evergreen fund; so it’s a single fund. Thus far, we have invested around $350 million; so we still have about half a billion dollars of available capital,” said Sumir Chadha, co-founder and managing director at WestBridge.

In early 2011, four MDs at Sequoia Capital India – Chadha, KP Balaraj, Sandeep Singhal and SK Jain – moved out to set up a platform for public market investments. They revived their earlier avatar, WestBridge Capital, which was acquired by Sequoia Capital for its India entry along with the team in 2006.

WestBridge went back to the same set of investors for new fund, which includes university endowments and foundations. “Generally speaking we have a very blue chip set of investors which are top university endowments and foundations which have been with us in India over 15 years. And we have done very well by them. So essentially it’s the same set of investors who have invested in the first tranche and the second tranche,” added Chadha.

While WestBridge Crossover Fund has raised $825 million, one source said the fund’s corpus touches $900 million to $1 billion as it is marked to market (MTM). WestBridge Capital also manages two legacy venture capital funds from 2000s which takes it overall assets under management $1.2-1.4 billion.

This would put it close to its peers like Nalanda Capital, founded by former Warburg Pincus India MD Pulak Prasad which raised $875 million across two funds and ChrysCapital, which has $2.5 billion under management mostly focused on listed firms.

The endorsement for WestBridge’s public market strategy comes at a time when fundraising has become tough and limited partners are questioning what is the best strategy to invest in the Indian market.

Year 2013 saw the least amount of fresh commitments in any year in the history

of private equity in India. There were 33 private equity funds that closed in on $2.84 billion worth of new commitments during the year against the $3.1 billion of commitments mopped up by 51 funds in the previous year, according to VCCEdge, the data research platform of VCCircle.

Evergreen structure suits volatile Indian markets

WestBridge Crossover Fund’s unique evergreen structure does not have a limited life of 10 years, like a private equity fund, and profits are ploughed back into the fund. Also this allows the firm to make long-term investments without time pressure for exits.

“And long term capital is even more important today, as India might go through a few more tough years, but we are very focused on where India will be over the long-term. We keep investing because we are bullish about the Indian economy in the medium to long term,” added Chadha.

The evergreen structure is similar to General Atlantic, which is also active in India and US-based Sutter Hill Ventures, which has used this model since 1960s.

WestBridge could invest over $200 million in 2014, as market volatility continues to create interesting buying opportunities.

WestBridge has built a portfolio of 20 companies, which includes both large and small companies. “Many of our positions are fairly concentrated but it also includes small-cap companies where we take a 5-10 per cent stake with a long-term view,” said Chadha. Some of these include V-Mart Retail, where WestBridge owns 15 per cent and more recently DFM Foods, where it picked up 25 per cent stake.

But it has also made some larger bets in companies like Havells India and Supreme Industries, and its portfolio has already started showing profits. It started investing in Astral Poly Technik Ltd, which manufactures and markets chlorinated polyvinyl chloride (CPVC) plumbing system, when the company had a market capitalisation of Rs

300 crore. The company now has market cap of Rs 2,200 crore with WestBridge as largest non-promoter shareholder at 10 per cent. Astral has also seen interest of other FIIs like Massachusetts Institute of Technology and Steadview Capital.

WestBridge’s venture capital portfolio also continues to provide exits to the firm. In 2011, it sold its stake in AppLabs Technologies to NYSE-listed Computer Sciences Corporation at over 5x returns. Last year its portfolio firm GlobalLogic was acquired by Apax Partners for $420 million, where the firm was able cash in its stake for over $100 million.

Related

How WestBridge is betting big on India’s construction & ancillary business with public market portfolio 

WestBridge Capital takes big bite of ‘Crax’ maker DFM Foods for over $10M

(Edited by Joby Puthuparampil Johnson)


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WestBridge adds $325M to Crossover Fund, sitting on $500M dry powder

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