Mumbai: The UK government- backed fund of funds, CDC Group Plc., will allocate $250-300 million (Rs1,057-1,269 crore) to invest in India-focused private equity, or PE, funds each year, said Anubha Shrivastava, its London-based portfolio director for South and South-East Asia.
This will be on top of CDC’s current portfolio of about $1 billion in India, she added.
“Indian markets are sufficiently deep and this is a great time for investing,” Shrivastava said in a telephone interview from London. The brightest themes in India, she added, were infrastructure, real estate and microfinance.
CDC’s interest in India comes at a time when that of many of its peers in the country is waning. Many PE firms that had hoped to ride the growth in the Indian infrastructure sector, with plans to raise $500 million to $1 billion, are delaying the closing of these funds as they find it tough to meet targets, according to industry analysts.
“The financial crisis has affected investments in private equity as well,” said the chief executive of an India-focused PE firm who did not want to be named. His firm had announced plans earlier this year to raise about $1 billion to invest in Indian infrastructure.
Part of this problem stems from the quality of fund managers, said Shrivastava. “From a handful of PE fund managers a few years ago, there are some 500-odd fund managers in India today, but only about 50 have the right elements.”
Industry experts said some fund of funds are also in trouble. One example is US-based investment bank Thomas Weisel Partners Group Inc., which had announced plans to raise a $250-300 million India-focused fund of funds, Thomas Weisel Partners India Opportunity Fund L.P.
However, it could not find enough limited partners, or LPs (investors who put money into the fund), and could raise only about $63 million in its first closing. Since then, Thomas Weisel has put this fund of fund on the block, said a senior industry person, who did not want to be identified.
Executives at Thomas Weisel could not be reached for comment Monday evening.
Meanwhile, on Monday, investment tracker Vccircle.com reported, without revealing its source of information, that US asset manager Guggengeim Partners had acquired control of the India fund of funds business of Thomas Weisel Partners. Mint couldn’t independently verify this information.
Some fund of funds fail because of a lack of muscle, said CDC’s Shrivastava. To succeed, a fund of fund should have created enough awareness about itself among the investor community, she said. “There should be value-addition for investors to invest in fund of funds, instead of directly investing in PE funds.”
Globally, CDC has net assets of about $5.36 billion. It has investments in funds focused on Pakistan, Bangladesh and Sri Lanka, and is South Asia’s largest PE fund of funds. It is also a large investor in PE funds focused on Africa.
CDC continues to be optimistic on the growth potential of Indian companies and expects “upwards of 20% annualized returns for the next 10 years (from India),” Shrivastava said. In India, CDC’s funds portfolio include investments in four PE funds managed by UK’s Actis Capital Llp.
Actis, which focuses on PE fund management in emerging markets, was created from CDC Capital Partners in 2004.
CDC has also invested in India-focused PE funds of Aureos Capital Ltd, Avigo Capital Partners, Baring Private Equity Partners India Ltd, Switzerland’s BTS Investment Advisors Ltd, IDFC Private Equity, Kotak Private Equity, Lok Capital Llc. and New Silk Route Advisors.