Mumbai: Dutch financial services conglomerate ING Groep NV, among the top 20 companies in the world based on market capital, is looking to buy an established private equity, or PE, fund house in India, according to a company executive familiar with the development.
New Delhi-based Avigo Capital Partners, a PE fund manger with a focus on small and medium enterprises (SMEs), is a potential candidate, this person said, asking not to be named as the target is not finalized yet.
“We are looking to buy out a PE fund house or acquire strategic equity stake in one of them,” the ING executive said. The deal is being explored from ING’s Hong Kong office at One International Finance Centre on Harbour View Street, he added.
But, Vivek Subramanian, a founding partner at Avigo, said the firm is not in talks tosellout the business.
Avigo, which was started in 2003, manages around $130 million (about Rs557 crore) through its two funds—Avigo SME fund I and II, for investors such as CDC Group Plc., the UK government-owned fund of funds.
Avigo plans to raise around $300 million for a third fund, which “will do more of the same”, said Subramanian.
On the look out: ING Bank headquarters in Amsterdam. (Michel Porro / Bloomberg)
ING is also considering investing in US-based investment bank Lazard’s proposed $300 million India-focused PE fund.
Small funds will not survive long in the PE business, which is “essentially a large capital play”, said Jon Schahinger, who heads ING’s PE business in Asia from its office in Australia. “As the market grows, small funds perish if they aren’t taken over by larger funds.”
Only a few funds in India focus on SMEs, such as state-owned Sidbi Venture Capital, Aeurous and Blue River Capital, which is co-run by domestic brokerage Edelweiss Capital Ltd. On opportunities in infrastructure projects, Schahinger believes they make for high risk investments, though the bulk of Indian and foreign PE funds are betting big on them.
“There are always too many interfering factors associated with infrastructure projects,” he said. However domestic growth themes in India look attractive, he added.
Still, Indian infrastructure projects could see investments of up to $50 billion from PE funds, according to industry estimates.
Germany’s Deutsche Bank AG plans to invest $1 billion in the country’s real estate and infrastructure sectors, while US-based Merrill Lynch and Co. Inc. has raised a Pacific Rim real estate investment fund worth $2.5-3 billion to invest in Asian markets, including India.
“Infrastructure and real estate are among the strongest themes from India,” according to Parth Gandhi, managing director of Indian infrastructure-focused PE firm Vision Global Investments Llc., which recently raised about $300 million from global investors.
ING is ranked 13th in Fortune magazine’s list of top 500 global companies (Fortune 500) in 2007. ING runs banking, mutual fund and insurance businesses in India, among other operations.