Tata Capital back with second India opportunities fund – exclusive

Tata Capital is seeking $600 million for its second vehicle, Tata Opportunities Fund II, Private Equity International has learned.

The fund has a hard-cap of $750 million and the firm expects majority of the capital to come from overseas sources such as sovereign wealth funds, public pensions and funds of funds, Paddy Sinha, managing partner of Tata Opportunities Fund, told PEI.

He also noted that Fund II is structured as an Indian Alternative Investment Fund, with a pooling vehicle in Singapore for international investors. Unlike the first fund, which was domiciled in Singapore, the firm’s latest offering will be held under a “unified fund structure”, given the relaxation of foreign direct investment rules regarding the AIFs and improving tax certainty in India. This means restrictions on foreign direct investment, which include sector-specific caps, will not apply to private equity firms like Tata Capital that receive capital from both local and domestic LPs.

Fund II will have the same strategy as its predecessor, targeting growth and buyout deals in India, with average deal sizes between $30 million and $100 million. Tata Opportunities Fund, which raised $600 million in 2013, has eight companies including TVS Logistics and Uber Technologies, in its portfolio. Investors in Fund I include the Japan Bank for International Cooperation and Korea Investment Corporation, according to PEI data.

The launch of Fund II follows the Mumbai-headquartered firm’s first full exit from its debut fund, the 2011-vintage Tata Opportunities Fund. Earlier this month, Tata Capital listed auto component manufacturer Varroc Engineering on the National Stock Exchange of India and the Bombay Stock Exchange, generating a gross internal rate of return of over 50 percent and gross multiple of invested capital of about 6x for Fund I’s investors, according to a statement from the firm announcing the exit.

The firm had invested about $50 million in Varroc in 2014 and held it for about four years. Following the firm’s first exit from Fund I, Tata Capital has returned over 50 percent of the entire fund to its investors, it said in a statement.

Tata Capital also saw leadership changes in the second quarter of the year. Rajiv Sabharwal, a former partner at the Mumbai-headquartered mid-market private equity firm True North Managers, was appointed chief executive and managing director at Tata Capital. Sabharwal previously held executive director positions at ICICI Bank and Sequoia Capital earlier in his career. PEI understands Sabharwal officially took over from ex-chief executive Praveen  Kadle in April this year. Kadle has assumed other responsibilities in the Tata Group, Tata Capital’s parent company that comprises over 100 companies in the steel, infrastructure, real estate, telecom, technology, F&B and financial services industries.