Singapore-based Everstone Capital are targeting a fundraising round of $650million to invest in India. According to the Wall Street Journal’s Private Equity Beat, The India and South East Asia focused firm are planning to invest in companies that have “significant operations in the sub-continent.” Should Everstone reach its investment target, the fund would be one of the largest raised in recent years solely focused on India.
For a long time the darling of the private equity community and emerging market investors, India has found itself hampered recently by an unstable economy and outlook; along with a feeling many valuations are hugely overpriced.
Many firms that invested in India during the early to mid-2000s have also found exits difficult, although most investments have still realised profitable returns, albeit not at the levels expected.
The Washington D.C. based International Finance Corporation (IFC) is reportedly planning to invest as much as $50million into the fund, which is Everstone Capital’s third.
The IFC also told the Wall Street Journal that the fund will have a $700million hard cap. While there are no early indications as to the likely success of fundraising, the target is an ambitious one, outstripping the previous funds, worth $425million, in 2006, and $580 million, raised in 2010.
The Indian Government has recently created a $1.7billion fund aimed at helping start-ups, while there is a new found confidence in the economy following the general elections.
TPG Capital co-founder David Bonderman said earlier in October that he still expects private equity to proceed with caution in India. He said, “The new government is a turning point…and will absolutely benefit India, but what ails India can’t be fixed by one person [Narendra Modi, the newly elected Prime Minister]. After Modi euphoria there will be disenchantment, but it will level out.”
At the same time, a research report from Bain & Co indicates that confidence remains in India, but noted that due diligence levels are likely to be more stringent. The majority of Indian investments are considered relatively low risk, but the focus of private equity firms is now very much on realising the highest possible level of returns.
Everstone’s announcement of the new fund and the research report from Bain comes as some firms and fund managers opt to pull out of India completely. Kuala Lumpur based Navis Capital is among the firms to say they’re looking elsewhere, having experienced low returns from managing businesses and committing large chunks of capital to India in the past.
There are hopes that the IPO market in India will prove attractive in the short and long term to investors concerned over how they’re going to exit investments in the country, while industry giants including TPG Capital and Olympus Capital are among those continuing to focus on the country.