Mumbai: Tata Capital Ltd, a financial services business of the Tata group that manages various private equity funds, has earmarked $115 million to be invested as its general partner commitment, as the firm looks to raise up to $1 billion across three private equity funds, said two people aware of the development.
The three new funds that Tata Capital is raising are Tata Opportunities Fund II, Tata Capital Growth Fund II and Tata Capital Healthcare Fund II. Tata Capital had raised $600 million, $240 million and $75 million, respectively, in their maiden versions.
“Tata Capital is on the road to raise three new funds, which could see them raise a total of close to $1 billion, if the fund-raisings are successful,” said one of the persons cited above, requesting anonymity as he is not authorized to speak with the media directly.
“For these three funds— Tata Opportunities Fund II, Tata Capital Growth Fund II and Tata Capital Healthcare Fund II—they are looking to raise $500-600 million, $300-350 million and around $120 million, respectively,” he added.
While fundraising for the Opportunities and Growth funds are in the initial stages, that for the Healthcare fund could be closed as early as the end of this calendar year, he added.
To support the fundraising activities of the three funds, Tata Capital has earmarked significant sums of capital to be invested as the general partner or co-investment commitments in each of them.
A general partner or fund manager is typically required to commit a certain percentage of the fund’s capital from its own pocket in order to have ‘skin in the game’. This gives comfort to third-party investors in the fund, so-called limited partners, that the manager will invest capital responsibly as its own money is also at stake.
Tata Capital will invest $50 million each in both Opportunities and Growth funds, while the Healthcare fund is receiving a commitment of Rs100 crore, said the second person cited above, also requesting anonymity. “The $50 million investment in Tata Opportunities Fund will be in the form of co-investment,” he added.
An email sent to Tata Capital last week did not elicit any response from the company.
The Tata Opportunities Fund, through its maiden $600 million fund, invested the bulk of its capital in Tata group companies such as Ginger Hotels, Tata Sky, and Tata Projects Ltd. The second fund is expected to follow a largely similar strategy.
In August 2015, the Opportunities fund invested an undisclosed amount in taxi-hailing app Uber Technologies Inc. According to Reuters, the deal was worth $75-100 million. Other non-Tata group investments include auto-component maker Varroc Engineering Pvt. Ltd and TVS Logistics. The fund is headed by Padmanabh Sinha.
Tata Capital Growth Fund, which is headed by Akhil Awasthi, has invested in companies such as small finance bank licensee Janalakshmi Financial Services Ltd, insurance company Star Health and Allied Insurance Co. Ltd and affordable lender Home First Finance Co.
Apart from these funds, Tata Capital also manages a sector-agnostic venture capital fund, Tata Capital Innovations Fund. The fund invests in the range of $2-10 million in early-stage companies offering technology-based solutions for Indian as well as global markets.
Tata Capital’s fundraising comes at a time when a large number of fund managers are out in the market to raise capital, on the back of India’s increased attraction due to relatively stronger economic growth among emerging market peers and economic reforms such as the goods and services tax.
About two dozen private equity industry executives are on the road to raise up to $2 billion for their new funds, across private equity and venture capital, Mint reported in July last year.
The list includes former Carlyle Group managing director Mahesh Parasuraman and former India Value Fund Advisor partner Sunil Vasudevan’s Amicus Capital; former KKR India director Heramb Hajarnavis’s Sea Link Capital Partners; and Siddharth Parekh’s Paragon Partners.