Tata Capital Growth Fund (TCGF) raised $220 million in November 2011 and has deployed between $15 million to $30 million in nine portfolio companies. Akhil Awasthi, managing partner, Tata Capital Growth Fund, tells FE’s Neha Bothra in an interview that the fund aims to return around 60% of the capital raised from limited partners by the first quarter of CY 2016, in line with its plans to raise a second fund with a targeted corpus of over $400 million. Excerpts:
What percentage of the fund have you invested?
The fund is almost completely invested at slightly over 80%. We have dry powder for a few deals. We invest in all sectors except real estate and infrastructure. We haven’t done any PIPEs in this fund. We have a total of nine portfolio companies now and prefer to take complete rights and hold on to portfolio companies for three years or more and exit with good IRRs. Our fund has a combination of domestic and foreign limited partners (LPs) and around 65% investors are international.
Are you in the process of raising a new fund? Have you started road shows yet?
We would shortly commence the process but not at this point of time. We are awaiting monetisation and basically looking to sell one or two portfolio companies. This is in process and once we can get a number that we can show our prospective LPs, we will start our roadshows.
Are you targetting a similar corpus as the earlier fund or higher?
Actually we have interest for more. 2011 was a very bad time to raise private equity in general and for India in particular. So I think with the help of the Tata name and the kind of team that we have put up we could manage raising this fund. Now, we believe there is certainly more interest in India than in 2011 and we should be able to raise a bigger corpus. And that higher number depends on a couple of things. One is we want to continue our investment strategy, though the $15 million can stretch to $20 million, but we don’t want to raise our average to $40 or $50 million. The corpus size would really depend on the appetite. So at this point, when we launch say in the first quarter of 2016 and there is some major macro event that has happened then we will have to alter our size at that point of time. It cannot go larger than I would suspect $400 million but it could be well short of that also.
What is your strategy to exit investments? Is the strategic route a better option at this point?
Investing in the range that we have invested we are finding that there is a lot of interest in many of our portfolio companies with financial investors who cut deals of larger sizes. There are many financial investors who invest between $50 million to $100 million and that could provide us handsome returns in US dollars for the three year holding period. So that is the basis of my stating that we could do an exit. We are evaluating options to exit our stake in Tata Technologies. For all our other portfolio companies there is a lot of interest primarily from other financial and strategic investors. We are not actively considering IPO at this point of time for any of our remaining portfolio companies.
What kind of returns are you targetting considering that in the first quarter of calendar year 2016 you plan to raise up to $400 million?
I think, on an aggregate multiple of drawn down capital, 2.5 times in US dollar. We have one partial exit already in Janalakshmi and Tata Technologies would really be the second one. I think more important than the number of exits is returning at least 60% of the amount of capital we have drawn down. So I think whenever we achieve that, whether it is one exit it is fine if it is two or three exits its fine.