Kotak Mahindra Group, the Mumbai-based financial services group, will consolidate its private equity investment (PE) activities under a separate alternative investments subsidiary.
The company will open for business in October with approximately $1.5 billion (about Rs6,150 crore) in capital under management. This includes just the group’s private equity funds though new alternative investment products, among them a hedge fund, are in the pipeline, said a person close to the group, who did not want to be named.
The spokesperson for Kotak Private Equity Group (KPEG) declined comment.
Kotak’s move to integrate and expand its alternative investments activities, including PE, echoes similar moves by financial groups globally and in India in recent times.
Notably, financial services conglomerate Citigroup Inc. acquired Old Lane LP in April, which was a New York-based hedge fund with India operations. Mumbai-based PE firm ICICI Venture Funds Management Co. is also raising a hedge fund.
The move is also reflective of the blurring of lines between PE and hedge fund investors globally, the ripple effects of which are being felt in the Indian market with the entry of foreign hedge funds, such as DE Shaw & Co., LP, Tiger Global Advise Pvt. Ltd, Och-Ziff Capital Management Group Llc. and New Vernon Capital Llc. in the PE deal market here.
Alternative investment products typically include financial derivatives and commodities or hedge funds, which aim for strong returns regardless of market performance.
Kotak’s PE operations consist of two practices—KPEG, which focuses on growth investments, and Kotak Realty Fund, which invests in the real estate sector. KPEG, led by former ICICI Venture chief of private equity investments Nitin Deshmukh, is currently investing out of two funds—the $160 million India Growth Fund, which is a joint venture with SEAF India Investment Advisors, and a $100 million life sciences fund.
The India Growth Fund has invested 65% of its first fund across nine companies, including Pantaloon Group’s Home Solutions Retail India Ltd, technology solutions provider for logistics and supply chain Four Soft Ltd, air carrier Paramount Airways Pvt. Ltd, and a controlling stake in manufacturer of electro-mechanical components and machines Dynaspede Integrated. KPEG plans to raise a second fund which will have a corpus of at least $320 million.
The real estate arm is also investing out of two funds, whose aggregate corpus is $500 million, and is in the process of raising a third $350 million fund. The real estate group is led by S. Sriniwasan, who was earlier with Kotak’s investment banking arm.
The subsidiary will be housed on the 13th floor of Bakhtawar building in South Mumbai.