IFC to commit $25m to Lighthouse

International Finance Corporation will invest in the NY-based private equity firm that will fund SMEs in India.

Development finance institution the International Finance Corporation has proposed a $25 million commitment to Lighthouse Funds, a New York-based private equity firm with an India office, according to an investment summary from the IFC. 

India 2020 Fund II is the firm’s second vehicle for India and is targeting a total size of $125 million. It plans to invest in the country’s small- and medium-sized enterprises in capital-constrained sectors that have limited access to debt lenders or capital markets for financing their growth strategies.

IFC based its decision to back the firm on the team and recent performance. The proposal said, “The organisation consists of a strong team that has designed and executed a private equity strategy over a five-year period and across 10 investments. The partnership has stayed together over a rough fundraising period and established their credentials in sourcing, investing and, now, exiting.”

Lighthouse's predecessor fund was a $100 million vehicle of 2008 vintage that delivered an estimated exit gross IRR of 30 percent with strong development effects on job creation, gender equality and corporate governance, according to IFC’s summary of investment.

IFC will be the first institutional investor in the fund and ensure that ESG best practices are adhered to at the fund and investee company level. Its private equity arm invests in emerging market first- and second-time managers, which often struggle to garner commitments from more conservative institutional investors.

“We have been very positive about Indian private equity for a number of different reasons. We thought it was a good time to invest in a market where there is not a lot of capital, so we ramped up our programme actually and were able to find a lot of good Indian funds,” IFC global funds specialist and regional lead in Vikram Raju told Private Equity International earlier. 

“If you look at the amount of capital being raised for India versus what was being invested, you could quickly work out that there was not a lot of overhang left. Therefore valuations, which have always been an issue in India, have been coming down.”

IFC invests in emerging markets globally and had $4.1 billion in assets under management, with a 5.39 percent allocation to private equity as of October 2012, according to PEI’s data division. 

Vikram Raju from IFC will be speaking at the PEI Asia Forum 2013 in Hong Kong on 20-21 March 2013.