India Value Fund Advisors’ fifth fund, a $700 million vehicle that held its final close in July, has already committed $170 million across three investments, IVFA managing partner Vishal Nevatia told Private Equity International.
IVF-V has invested in south Indian television and internet services provider Atria Convergence Technologies, the largest transaction of the three. IVFA first invested in the company in 2008. It has also acquired a stake in non-bank consumer credit company Magma Fincorp and will support its expansion on rural areas, according to its website. Its investment in restaurant chain Indigo is the smallest of the three, and totalled $30 million according to reports.
The firm is pursuing the same strategy with its fifth fund as it had with its predecessors, targeting mid-market Indian companies with revenues of $25 million to $100 million. About 75 percent of its investments are in control transactions where the firm pursues a buy and build strategy, with the remaining 25 percent in minority investments alongside a company’s founder.
It is sector agnostic, Nevatia said, but has done more in healthcare, financial services and consumer focused business with an emphasis on food. “We think there is a huge opportunity in food and are looking for more food businesses.”
IVF-V held its first close in April at $500 million. It has 25 investors, all large institutions, including sovereign wealth funds, pension funds and fund of funds with a third in the US, a third in Europe and one third from the rest of the world, Nevatia said.
Fund IV, a 2009 vintage vehicle, was initially $715 million but was resized to $600 million and funds were returned to investors because the firm could not identify the right opportunities, Nevatia said. “2010, 2011, 2012 was not the right economic or investing environment,” he said.
The $600 million was largely invested over two years from 2013-2014. The Indian economy has bottomed out and seller value expectations have become relatively more reasonable, Nevatia noted.
IVFA’s third fund, a $400 million, 2007 vintage vehicle, will be fully liquidated within 24 months. “It has already more than returned capital to investors and is expected to deliver overall good returns,” Nevatia said.
Its second fund, which had commitments of $150 million and launched in 2005, has one investment remaining that will be realised in the next few months, he said.
In its India Report in June, PEI reported that sentiment among both private equity professionals and limited partners was improving after a tough few years, thanks to the election of Narendra Modi as prime minister in 2014.
This has boosted the appetite for fundraising, with LPs placing greater significance on a general partner’s track record. In terms of investment, improving macro-economic trends and promised reforms have improved business confidence, although valuations remain high, the report said.
“It is a very good time to invest because if this government gets its economic measures right, the next five or six years will be a very good time to invest in India. In the last cycle we had three and a half years of good times followed by three and a half tough ones,” Ramesh Venkat, founder and managing partner of Fairwinds Asset Managers told PEI.