India-based IDFC PE, the private equity arm of asset manager IDFC Alternatives Ltd., is targeting yearly investments totaling $200 million to be divided across four to five early-stage investments in smaller companies, according to managing partner and chief executive, MK Sinha. Private equity investments in India in the first nine months of 2015 to September reached a value of US$13 billion across 504 deals, according to data from Venture Intelligence.
The firm, which has successfully closed on three rounds of fundraising since 2004, will be concentrating on making investments in companies that are focused on agribusiness, foods, healthcare, education, and telecom services. To date, the firm has invested Rs5,000 cr (US$770 million) in 36 companies, and is targeting returns on investment near 20%.
It is expected that IDFC’s parent company, IDFC Bank Ltd, which began commercial lending operations on October 1 after performing as an infrastructure finance company, will assist in generating leads for potential investments between $30 million and $50 million each.
IDFC Bank’s network of 23 branches located across Madhya Pradesh, Mumbai, Bengaluru, Pune, Chennai, Kolkata, Delhi, and Ahmedabad will offer IDFC a wider range of exposure in a variety of markets and industries.
Using the bank’s network, IDFC PE will to identify companies that are relatively unknown but offer strong growth opportunities, said Sinha. “The fact that we are becoming a bank, the fact that we will have our tentacles in the far hinterland of India will give us deal origination capabilities.”
In 2012, IDFC Alternatives PE fund III invested in Indian agribusiness firm, Staragri Warehousing and Collateral Management Ltd – a warehousing, origination, and agri-commodity collateral management business, and Mumbai-based Parag Milk Foods. Currently, the group is in the process of planning to launch its fourth vertical fund that will be similar to the non-banking financial company (NBFC) collaboration between Singapore’s sovereign wealth fund, GIC and Kholberg, Kravis Roberts & Co (KKR), however the initiative is in its development stage and is not scheduled to be finalized for three to six months according to Mr. Sinha.