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MUMBAI: Xponentia Capital Partners has raised 365 crore ($45.7 million) as part of the first close of its second rupee-denominated fund, said top executives at the mid-market private equity firm.

Xponentia is aiming to raise a total of 750 crore for Xponentia Opportunities Fund II, which will be nearly double the size of its first fund.

The first fund closed at 351 crore in 2021, with another 100 crore coming in as co-investments from limited partners.

Both are registered as Category II Alternative Investment Funds under Sebi.

The bulk of the capital for the second fund has been raised from Indian corporates, family offices and high-net-worth individuals.

Xponentia expects to make the final close of the second fund by December-end. The second fund will make investments of about 100 crore each in sectors such as financial services, business services, healthcare and consumer.

“Investors in XOF-1 (Xponentia Opportunities Fund-1) are very pleased with fund performance," said P.R. Srinivasan, a managing partner. “Other than the fact that the returns are excellent, investors are appreciative that fund performance is driven by realized exits and is not based on valuation mark-ups alone. As a matter of fact, Distributions to Paid-in Capital or DPI is above 90% in XOF-1," he added.

DPI refers to the capital returned to a fund’s investors as a percentage of the capital taken from them.

Xponentia returned more than 90% of the principal from the first fund thanks to a partial exit from Barbeque Nation and a full exit from its investment in Spoton Logistics. Delhivery bought Spoton Logistics for about $235 million in 2021.

Meanwhile, the first fund continues to remain an investor in six companies, Flight Simulation Technique Centre, Barbeque Nation, Easy Home Finance, R4Rabbit, Medsource and Altigreen. It is also awaiting regulatory approval for its last investment from the first fund. The executives declined to name the investment.

“Timely exits have enabled us to reinvest and deploy 100% of the fund, reducing the spread between Gross and Net IRR (Internal Rate of Return)," Srinivasan said.

PE firms report a net IRR to their investors after taking out the 2% annual management fee on the capital raised. The firms try to boost the net IRR of a fund by not charging a management fee on the redeployed capital secured from an exit.

“We have had a very enthusiastic response from current as well as new investors", said Devinjit Singh, a managing partner.

“Domestic investors are highly under-allocated to classic private equity and alternatives as an asset class, and both family offices and institutions are keen to invest behind managers with track records and demonstrated performance. We are highly confident that we will achieve and probably exceed, the fund-raising target for XOF-2 in the coming few months", Singh added.

Xponentia was founded in 2018 by Srinivasan, Singh and Ajay Relan. Relan, who also founded private equity firm CX Partners, passed away in October 2021.

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