By Will Rasmussen
Dubai: Dubai-based private equity firm Evolvence Capital, which manages $1 billion (Rs4,444 crore) in India, the Gulf Arab region, and the United States, plans to invest $300 million more in India this year, its chief executive said on Tuesday.
The fund of funds will target India’s service sector and invest $250 million in Gulf Arab equity funds and $200 million in US real estate, said Khaled al-Muhairy.
Evolvence, which currently has $600 million in Indian funds, will target information technology, pharmaceuticals, and financial services by investing in locally managed Indian funds.
“We are very bullish on India in the long term,” Muhairy said in an interview. “India’s service sector is becoming more sophisticated in the value chain.”
Gulf Arab private equity firms are boosting petrodollar investments in India’s economy, which the country’s finance minister has said could grow by 9.2% in 2006/2007.
Istithmar, a private equity firm owned by the Dubai government, has said it could spend hundreds of millions of dollar on Indian real estate in the next few years.
“We like the Indian story and we understand the laws and the market,” Muhairy said.
Evolvence will also target Gulf Arab region equities, which Muhairy said could grow by 20% this year after a crash last year in which Saudi Arabia, the largest Gulf market, lost almost 53% of its value.
“This year will be the year of the Gulf,” he said. “We are at the bottom of the cycle ... Oil is at $60 a barrel, there is huge expenditure by governments and there is private sector-driven growth, which gives you all the means you need.”
Evolvence is setting up a Gulf derivative fund, which Muhairy said was the region’s first, to invest in instruments such as total return swaps and bonus certificates.
In a total return swap, parties exchange the total return from an asset for a fixed or floating cash flow that is unrelated to the asset. Bonus certificates give investors exposure to a stock or an index but limit downside risk.
Interest in derivatives should increase in the region as international banks move into the Dubai International Financial Centre, a free zone in regional trading hub Dubai, Muhairy said.
Evolvence, owned by business families and institutions in the Gulf, would likely list on the Dubai International Financial Exchange, based in the DIFC, within two years, Muhairy said.
“We are waiting for the DIFX to mature a bit,” he said. “Now we are building our organization.”