IDFC further trims Fund IV target to $200m – Exclusive

IDFC Alternatives, a Mumbai-based mid-market manager, has decreased the target fund size of its latest offering by another $100 million, as part of a plan to raise a successor vehicle in the near-term, Private Equity International has learned.

The firm had an initial target of $400 million for IDFC Private Equity IV, when it was launched in late-2015, but changed it to $300 million in late 2016. This decision is understood to have been taken because of the depreciation of the rupee, as previously reported by PEI.

“We have deployed capital from Fund IV in two transactions and a third is in the pipeline, since our first close in November 2016,” Girish Nadkarni, a partner with IDFC, told PEI. “A $200 million target is good enough for us to do 10 deals. Rather than doing a larger fundraise, we may come up with a new fund.”

Nadkarni did not comment on how much the firm has raised to date but said he is expecting a December final close for Fund IV.

India-focused fundraising numbers have fallen in the last three years, from $7 billion in 2014 to just $2 billion as of end August 2017, according to PEI data. The average fund size has also slipped, from $270 million in 2014 to $210 million in 2017.

Investors in IDFC Fund IV first close are mainly Indian LPs who have re-upped their commitments, Nadkarni said. The firm is also engaging with new investors from North America, Europe, Japan, Hong Kong and Singapore.

Fund IV follows the same strategy as its predecessors, focusing on the consumer, financial services, food and agriculture, infrastructure and industrials, as well as healthcare sectors in India. The firm expects to make 10 investments of up to $30 million to $40 million per transaction.

IDFC raised more than $640 million for Fund III in 2008 and collected $430 million for Fund II in 2006. Both funds are fully invested and partially realised. Limited partners in IDFC’s previous funds include fund of funds manager Evolvence India, CDC Group and Life Insurance Corporation of India, according to PEI data.

This week the firm fully exited its investment in renewable energy company Green Infra to Singapore-based Sembcorp Industries, garnering a 3.2x return multiple and 19 percent IRR for its Fund III investors, Nadkarni said.

IDFC manages more than $3 billion of assets across private equity, real estate and infrastructure.