Motilal Oswal Fin arm to float Rs 1,500-cr PE fund

Though the slump in private equity fundraising continues across the globe, Indian PE firms remain confident about their new fund-raising plans.

A new entrant into the PE space, Motilal Oswal Private Equity Advisors Private Limited (MOPEAPL), the PE arm of Motilal Oswal Financial Services Limited, is set to raise its third fund of Rs 1,500 crore. The company is expected to make the first closure of the fund by June 2010, which could be about Rs 250-300 crore. The fund, India Business Excellence Fund (IBEF) 2, to be closed by March 2011, will witness investment from the parent company, apart from offshore and domestic investors.

Motilal PE currently manages two funds?the $125-million (around Rs 560 crore) IBEF that focuses on SME investments and the recently launched Rs 150-crore India Realty Excellence Fund. From the IBEF, the firm is supposed to close two more deals worth $10 million (around Rs 45 crore) each by March 2010, by investing about 70% of the fund. So far about nine investments have been made from IBEF. Also, the first two investments worth Rs 25-30 crore from its real estate fund will be made soon in residential projects in Indian metros.

Vishal Tulsyan, CEO, MOPEAPL, is hopeful to close the fund in time. He told FE, ?For the last 3-4 months, the picture is changing in the Indian PE fundraising space. With limited partners continuing to show interest in the Indian growth story, there will not be many constraints for fundraising for Indian PE firms. Our previous track record also help us for further fundraising.? MOPEAPL would invest in companies involved in infrastructure and consumer related businesses. The deal size of IBEF2 would be in the range of Rs 50-100 crore.

The hesitance of limited partners for making new commitments has affected India-focused funds largely. The first half of last year had witnessed a 32% decline in fundraising, though the number of India-focused funds operating in the country continued to rise in 2008 and 2009. Fundraising in India dropped through the first half of 2009 to $2.5 billion (around Rs 11,250 crore)against $3.7 billion (around Rs 16,650 crore) raised during the first half of 2008. It grew by 67% in 2008 with $7.7 billion (around Rs 34,650 crore) raised against $4.6 billion (around Rs 20,700 crore) in 2007. At the same time, the investors remain confident of India?s potential in the PE space. According to Emerging Markets Private Equity Association?s last year survey, India remained one of top three most attractive investment destinations for institutional investors, with 22% planning to increase their exposure to the country and an additional 8% intending to invest in India for the first time over the next two years.

Major India-focused PE firms which are expected to close their first funds in 2010 include Avendus PE (Rs 1,000-crore), Aditya Birla Private Equity ($250 million or around Rs 1,125 crore), Reliance Equity Advisors (Rs 1,500 crore), Multiples Alternate Asset Management ($400 million or around Rs 1,800 crore) and Akansa Capital ($400 million).

Globally, the PE fundraising has slumped to its lowest level in five years in 2009 as investors held back from making new commitments, according to research firm Preqin published recently. A total of $246 billion was raised by 482 funds worldwide in 2009, down 61% from 2008. The fourth quarter of 2009 represented a low point for the year, it said, with only $35 billion raised by 75 funds?the lowest quarterly total since the third quarter of 2003. According to the report, the average length of time to raise a fund has increased to more than 18 months from earlier period of one year in the past 2 years.