With limited partners (LPs) turning cautious as the global recession leaves them with less surplus cash to invest, Yes Bank will now close its first private equity (PE) fund, the $200 million South Asia Clean Energy Fund (SACEF), by June this year rather than the earlier target of March. Yes Bank has already raised about $125 million for SACEF.
The PE arm plans to invest $7-10 million each in 20-25 companies once the fund is closed. Though the company is not averse to private investment in public equity (PIPE) deals, a majority of the investments will take place in unlisted entities. The investments will be in firms with a turnover of $10-30 million and involved in areas of renewable energy, energy efficiency and sanitation solutions. Further, the arm plans to launch a $250-300 million special situation fund.
As per earlier plans, the bank is also looking at sector specific funds such as a $500-million infrastructure fund, a $40 million food and agriculture fund and a $250-million life sciences fund. Other funds such as a buy-out fund, a VC fund and a real estate fund are expected post-2010.
Somak Ghosh, president, corporate finance and development banking, Yes Bank, told FE, ?In the current environment, fund rising remains a tough task and LPs have no surplus cash invest. The downturn has compelled LPs to be more cautious. Though there would be a delay, the reputation of YES Bank will help us to close the deal as soon as possible.?
The managing director of a Mumbai-based PE firm said, ?Though fund rising seems tough nowadays, the latest entrants will be hit more than the seasoned players. Also, the background and the capability of the LPs are more significant.? More time taken in convincing the LPs as well as the increasing caution will reduce the number of deals and increase the gap between deals this year, he added.
According to Grant Thornton, during January, 14 PE deals worth $202.22 million were announced as against 57 deals amounting to $1.51 billion in January 2008. CG Srividya, partner, Specialist Advisory Services, Grant Thornton says, ?Private equity is continuing the slow pace of activity that was seen in the last quarter of 2008. It could be another 5-6 months before the deal activity starts showing a significant momentum.?