Former Tata Group leaders and industry veterans are set to partner with Quantum Advisors to launch a billion-dollar environment, social, and governance (ESG) fund, which will take meaningful stakes in a range of listed companies, mostly in the mid-cap space, by adopting an active approach to work with promoters, boards and managements.
For this, the fund will have a slate of senior operating partners and a blue-chip advisory board. ESG funds are those that take environmental, social and governance factors into consideration while investing.
The proposed joint venture will be chaired by Mukund Govind Rajan, former Tata Brand custodian and member of the Group Executive Council, and chief ethics officer of the Tata Group.
All calls related to investments will be taken by Ajit Dayal, the founder of Quantum Advisors. Former Tata Capital chief operating officer Govind Sankaranarayanan and former Tata Sons director Alan Rosling are also part of the fund.
Over a telephone conversation with FE, Mukund Govind Rajan said that they intend to raise capital outside India and will approach long-term oriented capital pools like pension funds, sovereign wealth funds and university endowments.
“It will take us a couple of quarters to undertake a first close of the fund following which we plan to start investing capital in the second half of the calendar year. The good news is that this will position us very nicely to start deploying the funds after the general elections are over and we have clarity on the policies and priorities of the new government and a sense of the market environment,” he said.
The fund has a tenure of 8-10 years and is closed-ended. When asked about the geographic spread of investors, Rajan said that the capital may come from across the globe from long-term investors panning across the US, Europe, etc.
The ESG fund is looking to deploy an average of $30-50 million per company with their focus mostly on the midcap space. For that kind of quantum, Rajan said the fund may be able to acquire a high single digit stake in target companies.
“Of course, we will also have to be respectful of different regulations in various sectors that govern foreign investment. Our interest is not in controlling companies. We believe in working in collaboration with promoters and assisting them with the domain knowledge and execution capabilities that our operating partners will bring,” Rajan said.