Turnaround specialist Halcyon launches fund

The firm's first third-party fund aims to raise $200m for opportunities in India.

India-focused special situations investment firm Halcyon has launched its maiden third party fund, Halcyon Special Situations India Fund. The fund is targeting commitments of $200 million, Paresh Mashru, managing director at the firm, told sister site PEI Asia.

Halcyon began fundraising in the third quarter of 2009 and aims to at least reach a first close before the end of the first quarter of 2010, Mashru said.

Halcyon Special Situations India Fund will break down into two, $100 million sub-funds, one denominated in US dollars and the other in Indian rupees. Mashru said that the two sub-funds would invest alongside each other on a pro-rata basis, although up to 33 percent of each sub-fund could be invested in areas restricted to the other sub-fund for regulatory reasons.

Halcyon Special Situations will focus on “stressed and distressed companies in the middle market” going through either financial stress or managerial stress, said Mashru, adding that the firm looks for situations where companies need not just capital but help as well.

“We’re not passive investors. While we don’t always insist on control and are happy to take significant minority positions with stakes of between 15 percent and 40 percent, we will insist on having other rights in addition to the shareholding,” he said.

Examples of potential investments include companies with sound business models undergoing some form of temporary stress, such as that resulting from succession issues, faulty business strategies or too much leverage.

Halcyon will not invest in start-ups and in early stage businesses and will only seek opportunities in companies that have demonstrated a capability to generate cash flows. On average, the firm will look to invest between $5 million and $20 million per deal.

Halcyon, which has offices in Mumbai and Mauritius, was formed in 2004 as a turnaround specialist. For the first two years of its existence, it invested only on behalf of shareholders and their families and friends.

In 2006, the firm entered into an exclusive arrangement with Boston-based The Baupost Group, an investment adviser, to invest together in special situations in India. As the firm moves to a traditional LP-GP fund structure, Baupost will remain a limited partner in its maiden private equity fund, Mashru said.

Halcyon currently has three managing directors and another five professionals on its deal team. The firm plans to build out its team as it raises its fund, said Mashru. Alongside Mashru, the other managing directors are Narayan Seshadri and Abhay Soi. All three come from a background in consulting and they previously worked alongside each other at Andersen's India operations.