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IIFL AMC eyes up to Rs2,000 crore for new PE fund

IIFL Asset Management Ltd (IIFL AMC) has launched its latest fund, IIFL India Private Equity Fund, with a focus on backing professional entrepreneurs, and targets raising around Rs1,500-2,000 crore, a senior company executive said.

The fund is a close-ended Sebi-registered Category II Alternative Investment Fund (AIF). IIFL AMC's AIF business currently manages capital commitments of Rs20,000 crore across strategies.

"The last decade has seen many professionals successfully embark on their entrepreneurial journey. They have leveraged their past experience as professionals and accessed organized pool of capital from investors to create large enterprises. This fund has been set with a vision to back and promote such professionals," said Amit Shah, chief executive at IIFL Asset Management Business.

Shah added that unlike a seed/venture capital fund or a growth capital fund, which focuses on particular growth stages of a company's lifecycle, the IIFL India Private Equity Fund will straddle multiple stages across the company's lifecycle.

"Today, there is not a single private equity fund in India that straddles through the seed or venture stage going all the way to the growth and late stage. The biggest disadvantage for a seed or venture capital investor is that they keep on getting diluted because the fund size is small and you can't keep on topping up capital. So, the investors don't get much benefit even if the company grows a hundred times, because you are diluted so much," he said. While the risk for growth capital PE investors is that they write larger cheques and if the business doesn't work out, then one has to write off a larger amount of capital, he added. IIFL India Private Equity Fund will aim to create a portfolio of 12-15 companies, investing an average of Rs70-100 crore in each of the companies over a period of time.

"Though you are committing large sums, the money goes at several milestones so that you are not diluting yourself and if the company grows 20x or 100x, all you investors are benefiting on the full rise," said Shah.

The fund will focus on professional entrepreneurs who are looking to build businesses in sectors such as financial services, consumer, healthcare and technology.

"We believe there will be lot of growth in these spaces and which will not be dependent on the global markets. We believe India is in secular growth phase. The demographic in India is changing big time and with the disposable income coming into the hands of the middle class, that is going to change the economy in a huge way," said Shah.

The firm has already identified two investment opportunities, one each in the financial services and healthcare sectors. "Our investment will be on NBFC (non-banking financial services company) side. We are looking to back a professional from a large housing finance company, who was responsible for the turnaround of the firm in last five years. The second investment will be in the eye care," said Shah.

For the fund-raise, IIFL AMC is largely targeting domestic investors at this point of time and expects a first close of the fund by the end of July.

"At this point, we are largely raising the fund from domestic investors. There is a huge demand in India. Once we create a track record of a few investments, we can go offshore and raise a larger round," said Shah.

The fund will also allow co-investment opportunities to investors.

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