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Tata Opportunities Fund II could launch in 2016

Its current fund is expected to be fully invested in the next six to nine months.

The Tata Opportunities Fund (TOF), a $600 million, 2013-vintage vehicle, is expected to be fully invested in the next six to nine months, TOF partner Bobby Pauly told Private Equity International.

Should that capital be deployed as expected, Fund II could launch in 2016, he said.

The size and strategy of the successor fund has yet to be decided but it is likely to pursue the same off-market, proprietary investments.

TOF typically invests more than $50 million in minority or majority stakes in market leading businesses with strong brands looking to expand their international operations. It is managed by Tata Capital, a subsidiary of Indian conglomerate Tata Group.

The fund will probably make a further one or two investments beyond an imminent transaction involving an Indian-headquartered company, and could include co-investors, Pauly said.

Following its investment in US taxi app Uber, announced this month, future investments could include other global companies looking to expand in India and territories where the Tata Group operates, he added.

TOF has invested $400 million to date, excluding the Uber deal, which reports said was in the area of $100 million. The terms of the deal are confidential.

When asked if the investment in Uber marked a change in strategy away from targeting Indian companies, Pauly said that “it’s not a shift in strategy per se, but the first time the fund has done a deal of this nature”.

The Tata Group has already brought brands like US coffee shop chain Starbucks to India, Pauly added. But typically the fund has acquired stakes in Indian companies and used the Tata network to help them expand internationally, he said, citing Varroc Engineering and its acquisition of Visteon’s Automotive Lighting business which supports Jaguar Land Rover as an example.

“We continue to help Varroc to expand internationally and have been looking at a few game-changing, cross border opportunities for them,” Pauly said.

TOF’s investments are currently split about 50:50 between Tata-related entities and third-party companies.

In July, the fund invested $55 million in Tata Projects, an engineering, procurement and construction company based in Hyderabad. This followed a $100 million investment in Tata Sky satellite television service, its largest transaction, and Ginger Hotels, a subsidiary of Tata Group’s Indian Hotels Company.

It smallest investment was the $40 million acquisition of a minority stake in TVS Logistics announced in May. The deal will assist the company acquire another Indian logistics company, DIESL (Drive India Enterprise Solutions Ltd), which is a Tata International and Tata Industries joint venture, as reported by Private Equity International.

When asked about competition from other funds investing in its deal space, Pauly said that “we haven’t had a situation where we have had to compete with KKR or Blackstone or other Indian funds. If it comes to that, we opt out. Auctions typically mean sub-optimal pricing. It’s the winner’s curse. We try to get exclusivity before pricing discussions. Almost all of our deals are unique. The flip side is that deals can take a long time to execute”.

TOF’s investment in Tata Projects took three years to close, he added.

Investors in TOF include Japan Bank for International Co-operation and the Korea Investment Corporation, according to PEI’s Research & Analytics division. The minimum commitment was $50 million.

Almost 75 percent of India-focused funds in market are being raised by domestic managers, PEI Research reported in May.

In July, India Value Fund held its final close in July at $700 million, as reported by PEI. The fund has already made three investments totalling $170 million.