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India-focused Paragon closes debut fund on $120m

Investors in the first-time manager include Fairfax Group, Small Industries Development Bank of India and Edelweiss Group.

India-focused mid-market firm Paragon Partners has held a $120 million final close on its debut fund, against a $100 million original fundraising target.

The first-time private equity manager began fundraising for Paragon Partners Growth Fund in mid-2015 and held a $50 million first close in January last year.

Investors in the first close included The Fairfax Group, the Small Industries Development Bank of India and some Indian family offices, Cyril Paul, head of investor relations at Paragon told Private Equity International.

For the final close, the firm received backing from Kotak family office, Edwelweiss Group, global funds of funds, insurance companies, corporate treasuries, high net worth individuals, and a sovereign wealth fund.

Expected returns for the fund are more than 25 percent internal rate of return and 3x of investment multiple, Paul added.

The firm targets minority stakes in high-growth mid-sized businesses in the consumer, infrastructure, financial services, healthcare services and industrial sectors in India. It will invest between $10 million and $20 million per transaction, and has given co-investment rights to its LPs for transactions in the same range.

The firm already has four companies in its portfolio and expects to close another three transactions by the first quarter of 2018. Paragon has backed engineering components manufacturer Maini Precision Products, retailer Cravatex Brands, non-banking finance company InCred and Capacit’e Infraprojects which was listed in September and raised $62 million from investors.

Siddharth Parekh, a senior partner at the firm, said Paragon remains excited about the India macro story and is bullish on the manufacturing sector. “Indian private equity market has gone through a difficult period, there’s more negative news than positive over the last few years that has driven LPs away, and the performance has struggled,” Parekh said. “However, I believe the macro situation has improved, funds have been exiting and delivering returns thanks to the IPO market.”

Ion Pacific Limited, a Hong Kong-based merchant bank, served as international advisor and exclusive placement agent to Paragon Partners.

Amicus Capital, founded by former Carlyle India managing director Mahesh Parasuraman, and SeaLink Capital Partners, which was set up by ex-KKR private equity head in India Heramb Hajarnavis are also in the market raising maiden private equity vehicles for Indian private equity, with both targeting between $100 million and $200 million.