Tata Capital has made a final close on its latest Tata Opportunities Fund at $600 million – the largest debut fund ever raised in India – having launched the vehicle in 2011, according to a company statement.
The fund made a first close on $450 million in April and has since committed about one-third of the fund across three deals, one of which has been officially closed.
The Tata Opportunities Fund, raised by the private equity arm of Indian family conglomerate the Tata Group, will invest in both growth and buyout deals in Indian businesses both from within and outside the Tata Group. The fund is sector and stage agnostic, but will invest mostly in sectors that are not reliant on government policy.
The firm joins ChrysCapital and Everstone Capital Partners as one of the few country GPs that has managed to successfully raise a recent India fund. ChrysCapital hit its $510 million hard cap for its sixth India-focused fund in May last year, while Everstone closed its second fund on $550 million in March 2011.
Yet despite the near-impossible fundraising climate in India, Tata raised capital from LPs across the globe, including sophisticated North American investors, Asian and Middle Eastern sovereign wealth funds, family offices and financial institutions, according to the statement.
There are quite a few investors that have been disappointed with private equity performance in India…they are looking for returns from [the existing] portfolio before making incremental commitments
Paddy Sinha, managing director, Tata Opportunities Fund
The firm has also entered into agreements with LPs that they can co-invest directly into businesses alongside the fund on a mutually discretionary basis.
“It has been a challenging period for fundraising in India,” Paddy Sinha, managing director of Tata Opportunities Fund, told Private Equity International. “There are quite a few investors that have been disappointed with private equity performance in India, particularly in the vintages where a lot of investments happened in 2006 to 2008 and they are looking for returns from that portfolio before making incremental commitments.”
“The Tata plan helped [us], as well as the fact that we have some off-market deal sourcing [capabilities] built-in,” he continued. Tata often invests in its own businesses, as well as finding non-Tata companies through the group's large network.
However, investors still had concerns when the fund reached out to the market. “There are concerns around conflict [when investing in Tata businesses]. So we have a fairly sophisticated conflict management mechanism built in. [For] Tata deals, effectively LPs have a veto if the majority of them are not comfortable with the pricing. For the non-Tata deals we have complete flexibility.”
Rajesh Singhal, partner at Tata Opportunities Fund, added, “Investors are still pretty much excited about the prospects of growth in India, but the concerns weighing on their minds have been around some of the slowdown that has been seen and some of the policy-related issues and lack of action from the [law-making] side in pushing the reform pace. But I think across the board when we talked to LPs, people realise and appreciate that in a longer-term horizon, which is what private equity is all about, they think India still offers [itself] as a very attractive investment destination.”