Mumbai: Axis Asset Management Co. Ltd, the asset management business of Axis Bank Ltd, is planning to raise a pre-initial public offering (IPO) fund of around Rs750-1,000 crore, two people aware of the development said.
With fundraising through IPOs touching a record high in 2017, pre-IPO investments are increasingly becoming more popular as a way to get some meaningful exposure to IPO bound companies for high net-worth individuals (HNIs), family offices and institutional investors.
“Axis Asset Management is looking to tap the rising demand for pre-IPO investments from HNIs and family offices. Given the strong demand that most IPOs have witnessed, it has become difficult for these investors to gain a meaningful allocation in IPOs. Hence this capital is looking for pre-IPO placements where allocations are guaranteed," said one of the two people cited above, requesting anonymity as he is not authorized to speak to reporters.
Pre-IPO rounds often take place at a discount to the eventual IPO price, which further enhances returns for investors, he added.
According to the second person cited above, Axis Asset Management has tied up with wealth management firm ASK Group for distribution of the fund to the latter’s clients.
“Axis has tied up with ASK for distribution among its strong network of wealth clients. Axis and ASK will look to raise half of the Rs750-1,000 crore fund, each. The fund will look at pre-IPO investments and IPOs, though pre-IPO will be the primary focus of the fund," he said, also requesting anonymity.
ASK Group currently manages assets of over Rs35,500 crore ($5.5 billion) across seven offices in India. The group also has offices in Dubai and Singapore.
Emails sent to Axis Asset Management and ASK Group did not elicit any response.
Axis’s pre-IPO fund follows the successful IIFL Special Opportunities Fund, launched by IIFL Investment Managers earlier this year.
IIFL Special Opportunities Fund, across several tranches, managed to raise almost Rs7,000 crore.
So far this year, companies have raised at least $600 million through pre-IPO funding rounds, according to a Mint analysis.
The activity has been led by large deals such as the $383 million pre-IPO funding round by a consortium of investors led by Warburg Pincus in ICICI Lombard General Insurance Co. Ltd and IIFL Special Opportunities Fund’s $60 million bet on Reliance Nippon Life Asset Management Co. Ltd.
Kishore Biyani-owned Future Enterprises Ltd on Monday said funds managed by financial services firm Edelweiss have bought a 4.9% stake in its IPO-bound unit Future Supply Chain Solutions Ltd. The Edelweiss managed entities bought the stake from Future Supply Chain’s private equity investor SSG Capital Management for around Rs124.8 crore. The pre-IPO activity has also attracted the interest of public markets focused investors too. Several public markets-focused institutional investors such as hedge funds, family offices and high net-worth individuals, have tapped pre-IPO financing opportunities.
In September, Mint reported that IPO-bound Prataap Snacks Ltd had raised Rs50 crore in a pre-IPO round from public market investor Malabar Investments. In the following month, Mint reported that private equity firms Aditya Birla Private Equity and Multiples Alternate Asset Management had sold part of their stakes in IPO-bound Indian Energy Exchange Ltd to several high net-worth individuals and SBI Life Insurance Co. Ltd days before the company’s IPO.