Edelweiss raises pre-IPO fund of up to Rs1,750 crore
Mumbai: Financial services-focused Edelweiss group has raised its latest alternative investment fund—Edelweiss Crossover Opportunities Fund—a pre-initial public offering (IPO) fund of up to Rs1,750 crore (approx $270 million), said a senior executive of the firm.
The Edelweiss group, through its various entities, manages several alternative investment funds such as credit funds, real estate funds and a distressed assets fund.
The Edelweiss Crossover Opportunities Fund has already made its first investment. On 20 November, Mint reported that special situations fund SSG Capital Management had sold a 4.9% stake in IPO-bound Future Supply Chain Solutions Ltd to funds managed by Edelweiss. The transaction was valued at Rs124.8 crore.
“The fund will invest in companies that are at a ‘crossover’ point of value discovery as they go from private to public,” said Nitin Jain, chief executive-global asset and wealth management at Edelweiss.
The fund will invest in a continuum of stages on either sides of the IPO event, he added. “It will invest early in pre-IPO, where it will invest in pre-DRHP (draft red herring prospectus) companies to catch early in the cycle, and capture value. It will also accumulate post-IPO, investing in and after the IPO to maximize the upside from high quality stocks,” Jain said.
The robust performance of the IPO market, driven by a strong pipeline, motivated the firm to target the pre-IPO opportunity.
“The IPO pipeline is expected to remain strong, driven by a number of factors including overdue PE exits, companies looking for growth capital given the positive economic outlook, and large business houses looking to unlock value by listing subsidiaries,” Jain said.
Capital markets are expected to remain stable in the near- to medium-term, backed by sound macroeconomic factors, a stable government, and India’s favourable standing among emerging markets, he added.
With fund-raising through IPOs touching a record high in 2017, pre-IPO investments are increasingly becoming more popular as a way to get some meaningful exposure to IPO-bound companies.
So far this year, companies have raised at least $600 million through pre-IPO funding rounds, according to a Mint analysis.
The activity has seen several firms raise dedicated funds to focus on pre-IPO opportunities.
On 22 November, Mint reported that Axis Bank Ltd’s asset management firm Axis Asset Management Co. Ltd had launched a pre-IPO focused fund with a target corpus of Rs750-1,000 crore.
The trend was started by IIFL Investment Managers, which earlier this year raised Rs7,000 crore, across various tranches, for its pre-IPO fund IIFL Special Opportunities Fund.
The pre-IPO activity this year has been led by large deals such as the $383 million pre-IPO funding round by a consortium of investors led by Warburg Pincus in ICICI Lombard General Insurance Co. Ltd and IIFL Special Opportunities Fund’s $60 million bet on Reliance Nippon Life Asset Management Co. Ltd.
The opportunity has also attracted the interest of public markets-focused investors. Several public markets-focused institutional investors such as hedge funds, family offices and high net-worth individuals have tapped pre-IPO financing opportunities.
In September, Mint reported that IPO-bound Prataap Snacks Ltd raised Rs50 crore in a pre-IPO round from public market investor Malabar Investments.
In the following month, Mint reported that private equity firms Aditya Birla Private Equity and Multiples Alternate Asset Management had sold part of their stakes in IPO-bound Indian Energy Exchange Ltd to several high net-worth individuals and SBI Life Insurance Co. Ltd days before the company’s IPO.
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