WestBridge Capital Partners, the investment firm revived earlier this year by four managing directors of Sequoia Capital India, has mopped up $500 million for its debut fund focusing on investments in public markets and late-stage private companies. The new fund, called WestBridge Crossover Fund, comes less than six months after those four MDs – Sumir Chadha, KP Balaraj, Sandeep Singhal and SK Jain – left Sequoia.

KP Balaraj, now the managing director of WestBridge Capital Partners, has confirmed that the firm has closed a $500 million fund but declined to offer any further comment.

“The new fund, a long-term investment vehicle, will invest in both public, as well as later-stage private companies. Investors in the WestBridge Crossover Fund include leading university endowments and major foundations,” a statement issued by WestBridge said.

When the decision to quit Sequoia was announced, WestBridge MD Sumir Chadha told VCCircle that they would look to raise a fund with a size of over $200 million by the end of 2011. WestBridge’s ability to raise $500 million in a short span of time also confirms limited partners’ (LP) interest in backing experienced fund managers and the potential returns from public markets investing. The WestBridge team had started making public market investments during late 2008 and several of those investments have earned good returns.

“If you talk to some key guys in the industry who have been around for some time and made money, they will tell you that public investing is generally more attractive than late-stage private investing. But I think if one wants to do public investing, they should raise a vehicle, which can invest sizeable amount of money in public markets and is marketed and positioned that way,” Chadha told VCCircle.

In February this year, Chadha, Balaraj, Singhal and Jain moved out to invest in public equity, as opposed to the parent Sequoia Capital’s focus on private markets and early-stage investing. The four were the original MDs of Sequoia Capital India and had set up WestBridge Capital at the turn of the century to invest in early-stage technology firms in the country. The split was amicable and they continue to sit on the board of 20-plus companies from the portfolio of Sequoia/WestBridge.

WestBridge, founded in 2000, had raised two funds before merging with Sequoia Capital in May, 2006. Post-merger, the firm had raised three funds, taking the total funds under management to $1.8 billion through a total of five funds.

WestBridge’s new fund also comes at a time when market regulator SEBI has introduced a number of changes in the takeover code and also introduced regulations for the alternate investment fund (AIF) industry. SEBI’s new takeover code states that investors can take up to 25 per cent stake in listed firms with triggering open, which is expected to boost PE investments in the listed space. The AIF regulations, which are at a draft stage, also include provisions to register as a PIPE (private investment in public enterprises) fund and hedge funds.

The interest in public markets investing has been rising. Of the 3,000 regularly traded companies in India, more than 2,700 are small caps and mid-caps, with a market capitalisation of less than $500 million. Most of these companies are also not covered by analysts, accounting for low-trading volumes and thus creating opportunity for PEs.

“There will be increasingly more organised activity around public equities in India over the next decade,” said Chadha.

Nalanda Capital, a Singapore-based private equity firm founded by former Warburg Pincus India MD Pulak Prasad, closed its second fund with commitments of $475 million earlier this year. Nalanda was the first firm to raise PIPE-focused fund when it mopped up $400 million in 2007.

ChrysCapital is also one of the pioneering investors in Indian capital markets, having made multi-baggers with investments in IT bellwether Infosys and Shriram Transport Finance.

Recently, India’s largest PE firm IL&FS Investment Managers has launched a new fund dedicated to PIPEs, with a target of around $300 million.

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