Private equity firms such as TPG Capital have asked their limited partners (LPs) for more time to invest undeployed capital, citing the current economic situation and a risky market.
Typically, the time-frame for a PE fund to make investments is five years and that to return the money to investors is 9-12 years. But, sometimes, they may ask for a year's extension. “It is logical to go slow on investment as the market is risky,” said a fund manager from a large PE firm who did not wish to be quoted.
Sun-Apollo India Real Estate Fund had asked for a one-year extension on its fund cycle ending February 2011 to February 2012. TPG Capital asked its global investors to extend the period for investment by a year for its $19-billion buyout fund.
Experts cite lack of exits as one of the reasons for the extension. “Some funds may want an extension on the investment time period due to economic uncertainties. PE firms have also not made exits from previous funds' investments and, hence, would want an extension on the life of the fund which would give them more time to exit,” says Sandeep Naik, managing director at General Atlantic. “In India, people are waiting for the rupee to appreciate, which will give better returns in dollar terms,” Naik said.
Apart from the depreciating rupee, the lack of fresh opportunities is also cited as a major reason for PE firms' asking for an extension. “Many PE firms in India may ask for an extension given the market situation and economic volatility,” said a consultant on the condition of anonymity.
“Generally, fund managers ask for a year's extension, but anything beyond that is not seen favourably. Usually, over two-thirds of investors need to vote in favour of an extension to get the resolution pass-through for PE firms,” says Prakash Kalothia, managing director and CEO at Sun-Apollo India Real Estate Fund. “Fund managers would prefer an extension of 1-2 years as that will give them a good waiting time to invest,” says Naik of General Atlantic.
"It is not unusual for PE