Dubai-based buyout firm HBG Holdings is coming up to the final close for its $200 million (€148 million) pan-regional fund focused on the Middle East and South Asia.
The fund is nearly four times the size of the previous circa $50 million of capital the firm had under management through individual targeted acquisition vehicles since 2004.
The latest fund will be invested over the next 12 to 18 months and the buyout firm will then look to raise sector specific funds. The final close of the fund is likely to be announced in November.
Zulfi Hydari, managing director of HBG Holdings, said: “Most firms in Dubai, have a Middle East and North Africa focus but we have decided to place more emphasis on the subcontinent.”
There is intense competition from other Middle Eastern buyout firms in North Africa and so the firm has decided to dedicate more effort to invest in Pakistan and India, Hydari said. The firm will also consider investments in North Africa although this is not its focus.
The buyout firm has had previous success from real estate investments in Pakistan, some of which have had a 30 percent IRR according to Hydari. After its success in real estate, the buyout firm is targeting infrastructure investments in the region because of their low risk profile.
It has yet to invest in India, but it is targeting the retail sector with expansion capital. There is much potential in the sector because of the booming middle class which is spending and earning at increasing rates, however “it is harder to get into India because getting round its bureaucracy is difficult,” Hydari said. The buyout firm has two planned investments in the country at an advanced stage.
The buyout firm’s last fund focussed on turnaround investments but it is now broadening its scope.
The firm is also considering an Islamic Finance fund because of the growing demand for such investment in the region. Hydari said: “We had some interested investors in this fund who did not come on board because we could not promise we would invest Islamically.”