Chrys Cap, Kedaara prepare their biggest funds ever

While ChrysCapital aims to raise $2-2.2 billion for its tenth fund, Kedaara is in the market for its fourth fund of $1-1.5 billion, two people aware of the development said. For both, this will be their biggest funds so far.

The two funds, which will raise capital solely from global investors, will focus on Indian growth stage companies. Given that investment sizes are getting bigger, fund sizes need to grow as well, the people cited above said on condition of anonymity. While ChrysCapital’s fundraising is in the pre-marketing stage, Kedaara has already received commitments for its fund.

Efforts by ChrysCapital and Kedaara Capital to raise large funds underscore the rising ambitions of India-focused funds looking to challenge global pools of capital. Many global funds have enhanced their India allocations and adopted flexible strategies, targeting growth-stage investments to full control or buyout transactions.

“The risk-reward profiles of deals here (India) vary from what we see in our other key markets in the region, given where India is on the industry maturity curve relative to other countries," said Anjana Sasidharan, head of India at L Catterton Asia, which plans to grow its presence in Indian consumer sector. Sasidharan cited India’s “expected demographic dividend and the robust fundamentals driving domestic consumption, coupled with its fervent entrepreneurship spirit," for growing PE interest in India.

ChrysCapital, which typically invests around $100 million, may raise ticket size in investments from the next fund, the people cited above said. The PE firm, which counts companies as Quest Global, National Stock Exchange, Bandhan Bank, Mankind Pharma, Kims Hospital, Intas Pharma, Lenskart, Wow Skin Sciences and Livguard in its portfolio, is currently investing from its ninth fund. Previously, it has backed marquee companies such as Infosys, Hexaware Technologies, KPIT, Bajaj Auto Finance, Mahindra Finance, Axis Bank, Shriram Finance, Torrent Pharma, GVK Bio, Cavincare and Suzlon.

Separately, ChrysCapital is also raising Clarus, an alternate investment fund (AIF) to invest in publicly traded companies. It has already raised ₹500 crore towards the first close of the category-3, open-ended AIF.

A ChrysCapital spokesperson did not respond to a request for comment.

Kedaara Capital may announce the final close of the fund over the next few months, one of the two people cited above said. “The firm has already started marketing the fund and is likely to raise the fund in the first half of the current calendar year," the person said. 

Kedaara has so far backed companies such as Perfios, Mahindra Logistics, AU Small Finance Bank, Bill Forge, Aavas Financiers and Vedant Fashions. It has so far raised three funds of $535 million, $800 million and $1 billion, according to alternative assets data provider Prequin. Kedaara Capital was co-founded by Manish Kejriwal, Sunish Sharma and Nishant Sharma.

The firm, which invests in consumer, financial services, pharma and healthcare companies, may cut larger cheques of $150 million from the new fund, the person added. 

Kejriwal did not comment on the fund, but stated that Kedaara has been deploying larger sums. “Last year, we deployed above $450 million in equity from our existing funds across five deals/companies in India. We also provided our limited partners an opportunity to co-invest more than $125 million alongside us in our deals, which were mostly proprietary in nature. This is the highest we have deployed in any one calendar year since we started operations 12 years ago," Kejriwal said. “Our cadence to deploy capital in India has gone up significantly given the increased size of our team—we have invested heavily in enhancing both our investing team and our operating teams," he added.

As the Indian economy nears $4 trillion, the size and nature of opportunities in the country have grown as well, said Srini Sriniwasan, managing director, Kotak Alternate Asset Managers Ltd. “India-based managers have come of age and gained track record and experience of operating in India. As the world looks at capital allocation decisions in 2024, the India investment opportunity makes a compelling case for country-specific allocation. The diversity of industries and asset classes wherein global capital can find appropriate risk adjusted returns places India in a unique position at present," Sriniwasan said.

Kotak has already raised a special situations fund of more than $ 1 billion, and is in the process of raising another one of similar size. The second fund has achieved a first close at $1.2 billion and is targeting a final close at around $1.6 billion in 2024.

“Pan-Asian private equity players used to invest close to 50-70% of their capital/fund in China. They would historically allocate 10-25% to India. Given what is happening in China, most of them are tweaking their models, with plans to deploy the bulk of the funds into India. For that, they will be increasing the size of their operations in India," Kejriwal said.

Bain Capital, which closed a $7.1 billion fifth Asian fund In November, expects to invest a lot more in India, Pavninder Singh, a partner at the firm, said in an interview in November. The firm is looking at a wider pool of sectors including late-stage technology deals. It has deployed about a quarter of the capital that it has raised for Asia in India. “There are opportunities to raise that percentage for India," Singh told Mint on Wednesday.

Other pan-Asian funds such as Carlyle, Bain Capital, KKR and Blackstone have also been increasing their exposure to India as compared to other regions. KKR expects to start raising its fifth Asia PE fund in 2024 and 2025, the firm’s executives said in an earnings call in November. KKR last raised $15 billion in 2021 for its fourth pan-Asian fund and has still ample dry powder left. In a shift in strategy, it is also seeking to invest across growth and buyout stages in India, Mint reported in July.

Rising pan-Asian competition is good for homegrown PE funds, too.

“This is good for the ecosystem, as many of these pan-Asian funds could emerge as buyers for our assets," Kedaara’s Kejriwal said.