Mumbai: Mumbai-based private equity (PE) firm Tano India Pvt. Ltd will raise $150 million (around Rs730 crore) from overseas investors, a promoter of the fund said.

Focus on entrepreneurs: Tano India managing director Hetal Gandhi says the company is in advanced stage of discussions with at least three companies, and is looking to make its first investment in an education firm. Abhijit Bhatlekar / Mint

Roadshows to raise funds will start next week, said managing director and founder-promoter Hetal Gandhi, who was earlier head of investment banking at Infrastructure Leasing and Financial Services Ltd (IL&FS) which on Tuesday was handed control of Maytas Infra Ltd.

This is Tano’s second fund, after it invested $65 million out of the $100 million raised in April 2007, largely in healthcare, telecom cables and engineering companies. Of the first fund, around 85% was invested by high net-worth US investors, known as family offices in private equity circles, and 15% by fund of funds.

“We would like to have a mix of institutional investors, funds of funds and pension funds in the second fund," Gandhi said on Monday.

The other founder-promoters of Tano are Charles E. Johnson, former co-president of Franklin Templeton Investments, and Carlton Perriera, former head of corporate finance at KPMG India, a consulting and audit firm.

“Our strategy has been to focus on entrepreneurs," Gandhi said. “We have received investment proposals from nearly 220 companies year-to-date but we didn’t make a single investment."

The PE fund has already invested in Sports Station India Pvt. Ltd, a Delhi-based retailer, and Icomm Telecommunications Ltd, maker of telecom equipment, which plan initial public offers of shares next year, he added.

“In the downturn, most good companies go into a shell. In fact, the best time to invest is in the beginning of a new cycle," he said, adding that the company is in advanced stage of discussions with at least three companies.

“We are looking to make our first investment in education. It (the firm) is into training for medical and engineering exams and we hope to announce it in a few weeks," Gandhi added.

Tano has invested $12.45 million in unlisted companies Icomm, $7.4 million in Anil Printers Ltd and $10 million in Virgo Engineers Ltd, that makes flow control valves and systems for oil explorers.

The year until June has been one of the toughest period to raise funds by private equity investors, said Jagannadham Thunuguntla, equity head at New Delhi-based institutional investor SMC Capitals. “The fund raising has come to a standstill," he said.

The few funds that have managed to raise money in 2009 are India Value Fund, which raised $725 million for its fourth round, and the Carlyle group, which raised $1.04 billion from its fourth Asian Growth Capital Fund to invest in India and China.

Thunuguntla said that last year was better due to the carry-over effect from 2007. “Since fund-raising takes 14-18 months, the closures in early 2008 were of funds that had plans to raise money in 2007. So 2008 has a pipeline effect of 2007, but 2009 does not have a pipeline effect of 2008," he said.

India-specific funds that raised $930 million in the first quarter of 2009 could raise less than one-tenth ($100 million) in the second quarter. Total funds raised in 2008 was $10.6 billion.

Sandeep Aneja, co-founder of Kaizen Education Fund I, attributed the slowdown to the fact that fund-raising today has gone back to what used to be the basic principles of four years ago. “Fund-raising was all about building relationships and LPs (limited partners) getting to know you and taking a decision over 10-15 meetings. LPs are now questioning every relationship that they have," he said.

Limited partners are the primary investors in a fund, typically pension funds, university endowments, hedge funds, fund of funds and high net-worth individuals.