Mumbai: Motilal Oswal Private Equity Advisors Pvt. Ltd, the PE arm of the financial services group, has raised 2,300 crore (approximately $320 million) for its third and its largest fund till date, a top company executive said. The investor raised a 550 crore ($115 million) PE fund in 2007, which was followed by its second fund in 2012 that raised 1,000 crore ($155 million) and is fully invested in 11 portfolio companies across sectors such as financial services, life sciences, niche manufacturing and consumption-based sectors.

The fund, India Business Excellence Fund III (IBEF III), saw significant participation from domestic investors, contributing to almost 75% of the corpus. The fund is managed by MOPE Investment Advisors Pvt. Ltd.

“About 75% of the corpus was raised from domestic investors, while the remaining 25% came from overseas investors. We have always raised a good portion of our funds from the domestic side, right from 2007, when we were one of the earlier guys who raised private equity fund from high net-worth individuals (HNI) and family offices. So, there is a relationship and track record that we have established with the domestic investors," said Vishal Tulsyan, managing director and chief executive officer of Motilal Oswal Private Equity.

The firm had launched fundraising for the third fund around June last year.

The fund received strong interest from domestic investors on account of various factors such as a deepening equity culture and the track record of its previous funds, according to Tulsyan.

“In the last 15 months, the overall culture of equity in the country has deepened, people are more open to looking at long-term equity investments. Second, people largely see Motilal Oswal as an investing house. Also, the track record that we have built on the private equity side attracted people to the fund," said Tulsyan.

IBEF III has already invested in three companies so far. It invested 143 crore in Gujarat-based non-banking financial company (NBFC) MAS Financial Services with a retail portfolio of two-wheeler, commercial vehicles and small and medium-sized enterprise (SME) loans. It has also invested in N. Ranga Rao & Sons Pvt Ltd, which makes Cycle incense sticks. The company has a strong pan-India sales and distribution, with a network of approximately 1.5 million retail outlets.

Last week, the PE firm said it is investing 200 crore in Ludhiana-based autocomp maker Happy Forging Ltd, a major manufacturer of crankshafts used in automobiles.

Financial services, consumer and healthcare will be the latest fund’s areas of focus, while it will also opportunistically look at the industrials sector.

“Between 60-70% of the fund will be deployed in sectors such as financial services, consumer and healthcare and the rest we will invest opportunistically in the industrial sector, where we see excellence getting created in terms of how large is the market opportunity and the quality of the management team," said Tulsyan.

The private equity firm prefers to back entrepreneurs and promoters, rather than acquiring a majority and controlling stake in companies.

“Control for us could mean governance control, either individually or with a group of investors, but ideally, we would like the promoter to be there. We would like to back the Indian promoters or entrepreneurs and typically, we prefer first generation entrepreneurs, and where a large part of the promoter/ entrepreneur’s own wealth is invested in the business, so we have an alignment of interest," said Tulsyan.

Motilal Oswal Private Equity has seen several exits from its portfolio in the last few years. The firm has already exited 10 of the 13 investments it made from its first fund. Some of the companies that it has exited include Parag Milk Foods, Mrs Bectors Food Specialities, Dixon Technologies and Power Mech Projects.

“From the first fund, we will end up returning 4.5-5 times the capital raised. The second fund, we closed investing in Q1 last year and we expect that we will start seeing exits from calendar year 2020 onwards," said Tulsyan.

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