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Mumbai: Marquee venture capital investment firm Sequoia Capital, which has $1.2 billion deployed in India, is in the process of raising its fourth India-dedicated investment fund, which will focus on venture and growth investments.

“We can confirm that we plan to raise a new India fund for both venture and growth investments. We expect the fund-raise to happen sometime in the first half of this year," said Abhay Pandey, managing director of Sequoia Capital.

The plans were first reported on Tuesday on the website of Fortune magazine, which said the fund is expected to be capped at $500-600 million. Pandey refused to divulge the fund’s corpus and other details.

Sequoia Capital entered the Indian market in 2006 and since then has raised three funds worth more than $1.5 billion. Its first venture capital fund had a corpus of over $400 million, while the two growth funds totalled more than $1.1 billion. Across its funds, Sequoia has invested in nearly 60 companies.

The fund raising plan comes at the close of an exceptional year for Sequoia Capital, both in terms of exits and returns.

In 2013, it made five exits, including three with returns of over five times the capital invested—Prizm Payment Services Pvt. Ltd (which was acquired by Japan’s Hitachi Ltd), Just Dial Ltd (which went public) and GlobalLogic (PE firm Apax Partners acquired it).

“We are not in the business of 18-22% internal rate of returns. We are more of an early stage investor and, therefore, take more risk and expect commensurate returns," said Pandey.

Typically, investment firms look for returns of 2.5-3 times the capital invested, which is often difficult to secure. According to Bain and Co.’s India Private Equity Report 2013, such firms have invested $85 billion in India since 2000. However, nearly 65% of the transactions in India are yet to offer returns as of 2013. The country has so far returned $30 billion on the $85 billion in investments, the report said.

“Focus on investing in certain sectors that a fund understands certainly helps—funds can take better investment decisions and also contribute more to the success of their portfolio companies," said Siddharth Bafna, partner and head of the corporate finance practice at Lodha and Co., a mid-market focused investment banking firm.

In 2013, Sequoia Capital also made eight new investments, including 80 crore in online financial services portal BankBazaar.com, 110 crore in Ahmedabad-based Vini Cosmetics Pvt. Ltd and 100 crore co-investment in Bangalore based Cloudnine Hospitals. It also provided seed capital to a pharma company, details of which have not been divulged yet.

The VC, which has sharpened its focus on healthcare, consumer and technology investments over the last two years, will continue with these core investment themes. It will, however, pare its public holdings and could invest as much as $200 million in unlisted, early-stage and growth companies this year. The firm’s ratio of private vs. public investments is 80:20, compared with 90:10 about a year ago.

“We are very focused on making and managing our private investments. Public market is not a focus area for us," said Pandey.

The investment firm will only take significant minority stakes in companies as it intends to be an active investor. “In 2008, we were often satisfied with a 5% stake. Now we want to own a lot more, which is consistent with our model of significant ownership and active involvement with our entrepreneurs," said Pandey.

Sequoia Capital generally invests $150-200 million a year and expects to deploy a similar amount in 2014 as well. Pandey said Sequoia is seeing some interesting trends in the Indian entrepreneurial ecosystem, including rapidly growing numbers of mobile Internet users.

“Indian companies are stepping out and catering to global firms (products and services) and there is emergence of gaming and Indian consumer Internet companies targeting a global market. I think it would be safe to say that we have never seen such a rich pipeline of opportunities," he said.

Sequoia Capital is hopeful of exiting three to five investments in 2014. “In my opinion, there is no shortage of capital for great companies. There is no buyer or secondary appetite for average companies," said Pandey.

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