Reliance AIF to raise equity-focused fund of up to Rs1,000 crore

Mumbai: Reliance AIF Asset Management Co. Ltd is raising its first equity-focused alternative investment fund (AIF) of up to Rs1,000 crore, called Reliance Equity Opportunities AIF-Scheme 1, a company executive said.

Reliance AIF, a unit of Reliance Nippon Life Asset Management Ltd, expects the new fund to achieve its first close in about a month. A first close is the point at which a fund that is in the process of raising money starts investing.

The fund has a base size of Rs500 crore and a green shoe option of another Rs500 crore.

The latest AIF from Reliance AIF Asset Management seeks to tap the opportunity created in the Indian economy due to major structural changes such as the goods and services tax (GST), digitization, and demonetisation, which are expected to drive formalization of the economy.

“The changes that have been happening in the economy, whether it is GST, demonetisation, Aadhaar-based identification, digital land records, Unified Payments Interface, etc., the entire thing is driving a move from unorganized to organized sector. There are so many opportunities on this front, which we are looking to capitalize on,” said Shahzad Madon, head of portfolio management services and alternative assets at Reliance Nippon Life Asset Management Ltd.

The sectors where the investment manager expects this trend to play out prominently include diagnostics and hospitals, building material, jewellery, branded apparel, plastic packaging, rural lending, retail and dairy among others.

“We are looking at areas where the share of the unorganized sector is very high and which will over time reduce because of all these factors. The firms we are targeting are high-growth companies in these sectors, whose growth could become further accelerated because of these changes,” said Madon.

“The stocks we look for are existing or potential leaders in their field with high capital efficiency, high return on equity, low dilution,” he said, adding that the fund will invest in a total of 15-20 companies.

The fund’s focus is on midcap, emerging companies. The fund will invest in companies with a market cap of under Rs20,000 crore.

“If you look at the large caps, they operate in areas which are already dominated by organized sector, so the theme of taking the share from unorganized market is less likely to happen,” said Madon.

The fund will also look at investing in new opportunities coming through the initial public offering pipeline.

Madon expects to wrap up fund-raising for the latest AIF in around three months. The fund has a lifetime of three-and-a-half years from the final closing.

In the past, Reliance AIF Asset Management has launched funds focused on credit and real estate. In February, Mint reported the investment manager launched a credit fund of Rs1,000 crore called Reliance Yield Opportunity. And, in January, Mint reported Reliance AIF is raising a Rs1,000-crore rental yield fund, the fund manager’s first such fund to buy and own office projects. Reliance AIF is currently also raising a Rs1,000-crore residential fund from Indian and overseas investors, Mint reported.

According to Madon, Reliance plans to invest further on AIF side as the structure is more suitable for niche and differentiated strategies. “The AIF structure provides much more flexibility in areas such as drawdowns and returning capital to investors,” he said.

The mutual funds business is growing strongly, and we think there is lot of growth potential in AIF business, he said.

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