Motilal Oswal PE’s third fund sees strong support from Indian LPs

The private equity arm of the Indian financial services firm has raised $320m.

Motilal Oswal Private Equity Investment Advisors, an India-focused mid-market firm, has held the final close on its third fund, beating its target.

The Mumbai-headquartered firm collected at least 23 billion rupees ($320 million; €280 million) for India Business Excellence Fund-III against an original target of $250 million. The fund launched in July last year.

Domestic investors make up close to 75 percent of the capital raised for IBEF III, the firm’s chief executive Vishal Tulsyan told Private Equity International. Its predecessor, the $155 million 2012-vintage IBEF II, had less than 40 percent of its capital raised from domestic LPs.

Tulsyan noted increasing interest from domestic Indian investors in private equity. “Domestic institutions and wealthy families are now investing directly in the private equity funds – this is a very healthy change for the industry.”

Banks, insurers, large family offices and high-net-worth individuals committed to the fund, along with several of the firm’s existing Indian and overseas LPs, its holding company Motilal Oswal and the investment team, Tulsyan said.

IBEF III is already about 25 percent deployed across three investments, with a fourth deal to be completed in a few months, Tulsyan added.

Aside from its predominantly domestic LP base, Fund III will have a longer tenure. Tulsyan noted the latest fund has a 10-year term with an up to two-year extension, a decision the firm made “because the Indian market has matured and for the firm to align with global best practices”. Funds I and II had a 7+2 term.

IBEF III will also make larger investments of up to $25 million per deal across a portfolio of about 14 deals.

IBEF I, a 2007-vintage fund that collected approximately $115 million, has two out of 13 investments left in the portfolio. In US dollar terms, the fund has already returned about 2.2x of invested capital, with one large exit still to be done, Tulsyan noted. Fund II has been fully deployed across 11 companies. The firm expects to start exiting investments over next two years.

Motilal Oswal Private Equity Investment Advisors was established in 2006 as the alternative investment arm of financial services firm Motilal Oswal. It manages close to $570 million across growth capital and real estate funds.