Mumbai: The oldest and largest private equity (PE) firm in India, ICICI Venture Funds Management Co. Ltd, or I-Venture, is in the market to raise its fourth equity fund. But with low investors confidence in the backdrop of a global market meltdown, the ICICI Bank Ltd subsidiary is finding it tough.
I-Venture has assets worth $2.3 billion (Rs10,810 crore) under management, across three private equity funds, one real estate fund and one mezzanine, or a hybrid of debt and equity, fund.
Tough market: ICICI Venture’s Renuka Ramnath says nobody could have been prepared for the current turmoil. Kedar Bhat / Mint
It had planned to make it a $10 billion fund company by 2010 but, going by the current trend, it may take a while before it reaches that figure.
In an interview with Mint in September 2007, Renuka Ramnath, managing director and chief executive of I-Venture, had said she hoped to quadruple assets under management by the end of 2010, making I-Venture a $10 billion fund.
On Wednesday, speaking on the sidelines of a private equity conference in the city, Ramnath said: “The aspirations remain, but whether it will happen in 2010 or two years later, will have to be seen.” The new PE fund, which is to close by early 2009, targets capital commitments worth $1.5 billion.
In last year’s interview, Ramnath had also talked about raising a new real estate and a mezzanine fund and getting into alternative asset classes such as distressed assets and hedge funds, all of which were to cumulatively account for the $10 billion.
While the mezzanine fund targeting $125 million will close by the end of this month and the private equity fund is being raised, none of the other plans have so far gone into the execution mode.
Its target year, 2010, is still far away, but Ramnath, who was recently ranked No. 13 on the US Banker magazine’s list of top 25 non-bank women in finance, has taken cognizance of the scarcity of capital in the aftermath of the global credit market turmoil that started playing out since August 2007.
“Nobody could have been prepared for this,” she said at the conference.
“It calls for a fundamental recalibration of the going-forward strategy,” she said, referring to the private equity world at large, which relies primarily on overseas capital.
ChrysCapital Investment Advisors, the other large domestic private equity firm, had raised a $1.25 billion India-dedicated fund in August 2007, just in time to avoid the capital crunch that set in since. ChrysCapital manages $2.25 billion across five funds, putting it in the same league as I-Venture.
While fund-raising will be tough, Ramnath, who has been heading I-Venture since 2001, does not see investors’ interest in Asian markets, including India, waning. “Fundamentally, there is nothing wrong. The total outstanding debt of a $1 trillion economy is $15 billion, which makes India highly underleveraged.
The average debt to equity ratio of companies that represent the Sensex (India’s benchmark equity index) is 0.13 or 0.14, and only 15% of the GDP comes from exports,” said Ramnath, indicating that the impact on the Indian economy from the global slowdown may not be severe.
According to her, the only near-term constraint will be capital flows from overseas. “But one consistent message I’ve been getting from pension funds and other long-term investors while fund-raising, is that their allocation to Asia is going to quadruple.”
If it’s 5% now, it will go up to 20%, she said. “Whether it’ll happen in the next five years or 10 years, I don’t know. But higher allocation of capital from the West to the East is bound to happen.”