India country manager Lighthouse Funds has raised roughly $60 million to reach a first close on its second India vehicle, a source with direct knowledge of the matter told Private Equity International. The fund is now assessing its first deal, which is likely to close in Q3.
Lighthouse declined to comment on fundraising.
The new fund, India 2020 Fund II, is targeting $125 million and PEI's source believes it will reach final close in the first quarter of 2014. The firm has secured re-ups from all its “major and institutional” investors from Fund I.
Lighthouse’s $100 million debut vehicle has now been fully invested across 11 portfolio companies. The firm has exited one business from the fund and plans to sell two more via trade sales over the next 12 months, the source said.
“It is a very, very tough fundraising environment so I think it takes a bit of skill and a bit of luck. India is not the most favourable of destinations amongst LPs right now,” the source explained to PEI.
LPs have concerns about India’s lack of exits, which has hampered GPs from returning money to investors.
Currency risk is another issue impacting investor sentiment.
[LPs] are worried about the currency. Most funds in this country have lost anywhere from 20 to 30 percent over the past five years all because of currency [depreciation]
“[LPs] are worried about the currency,” the source explained. “Most funds in this country have lost anywhere from 20 to 30 percent over the past five years all because of currency [depreciation]. If you’re on a rupee basis, you’re marking at two-and-a-quarter [times], on a dollar basis you’re at 1.6x. People aren’t putting money into India to make a 1.6x return.”.
Although India’s fundraising environment remains difficult, some funds are successfully raising capital. In July, Kedaara Capital surpassed the $500 million fundraising target for its debut vehicle, which will likely make a final close on its $600 million hard cap in the next few months, a source with direct knowledge of the matter told PEI earlier.
Similarly, in May, Tata Capital raised $600 million for its Tata Opportunities Fund, which was launched in 2011, according to the firm. It was the largest debut fund ever-raised for India.
Lighthouse Funds is headquartered in New York, but has an office in India. The firm is sector agnostic and invests in low- to mid-market opportunities, focusing on minority positions in deals worth $5 million — $15 million, according to the firm.