Mumbai: TCG Asset Management, the asset management arm of The Chatterjee Group (TCG), is planning to launch a Category III Alternate Investment Fund (AIF) called Primario Fund with a target corpus of over Rs2,000 crore.

“We are launching a Category III AIF, which will infuse primary capital in listed as well as unlisted companies in the form of preferential allotments, qualified institutional placements, initial public offerings, pre-IPOs and institutional placement programmes," said Chakri Lokapriya, managing director of TCG Asset Management.

Led by Lokapriya, TCG Asset Management has been investing in Indian companies since 2004.

TCG Asset Management manages offshore dollar-denominated funds as well as domestic rupee-denominated funds. Founded in 1989, TCG is based in New York and specializes in petrochemicals, pharmaceuticals, biotech, financial services, real estate and technology sectors in the US, Europe and South Asia.

Primario Fund will invest in opportunities where its capital can help companies restructure their balance sheets and enable them to return to a growth path.

“Our strategy will be similar to the bank recapitalisation programme. We will provide growth capital or late-stage investments wherein company is sitting with 40-50% capacity utilization, has some amount of working capital and long-term funding mismatch and therefore needs to set right its capital structure. Our capital will help them refinance its long-term debt which will lower interest expense, increase profitability and therefore create the environment for sustainably high stock prices," said Lokapriya.

The bank recapitalisation programme was announced on 24 October by the government to infuse Rs2.11 trillion into India’s banks.

Given the economic downturn in the last few years, corporate India’s profitability and growth rate has come down to 5-6%, which in real terms means there has hardly been any growth if inflation is factored in, Lokapriya said. According to Lokapriya, in order to prepare for the economic downturn, firms started expanding capacity in various forms, taking additional debts and increasing product offerings, which led to an environment of low capacity utilization, low profitability and also mismatch in capital structure because of funding long-term needs with short-term capital.

“Primary capital is the need of the hour, which, when infused into the companies, will help to repair their balance sheets, expand product offerings and launch in new markets," said Lokapriya.

Majority of the proceeds from Primario Fund will be deployed in listed companies while the rest in unlisted and soon-to-be-listed companies that have filed their draft red herring prospectus, where the team of TCG Asset Management believe that companies have to clean up their balance sheet in order to get ready for IPOs.

Primario Fund will be sector as well as market capitalisation-agnostic. The fund, which will invest in approximately 30 companies, intends to return over 15-20% a year to investors. The fund already has a strong line-up of investors, said Lokapriya, adding that TCG Group will invest 5% as its sponsor commitment. The launch of Primario Fund by TCG Asset Management comes at a time when several firms have launched public markets-focused AIFs this year, including Avendus which had raised over $500 million for its long-short equity fund and Reliance AIF Asset Management Co. Ltd, which is raising a Rs1,000 crore equity fund.

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