December 15, 2014

Lighthouse Funds nears Rs 900-crore target for second PE fund

Lighthouse Funds is close to raising its second private equity fund, India 2020 Fund II, which is targeting $125-150 million (about Rs 750-900 crore) to invest in mid-sized Indian companies.

MUMBAI:Lighthouse Funds is close to raising its second private equity fund, India 2020 Fund II, which is targeting $125-150 million (about Rs 750-900 crore) to invest in mid-sized Indian companies.

The Mumbai-based company’s move comes after the US government’s development finance institution Overseas Private Investment Corporation (OPIC) agreed to invest $42 million (Rs 250 crore) in the fund.

“It will bring the fund near the final close as it targets to finish fundraising by next quarter. The in-principle commitments have come in, but formalities need to be completed over the next few months,” said a person familiar with the development.

Lighthouse Funds, which has backed companies including Bangalore-based biscuit maker Unibic and Rajasthan-based snacks firm Bikaji Foods, plans to sharpen its focus on domestic consumption oriented companies with the new fund and invest Rs 30-100 crore in firms from FMCG, agriculture, healthcare and education sectors.

India 2020 Fund II made a first close last year at a little over $60 million. It has received a commitment of $25 million from the International Finance Corporation (IFC), the World Bank’s investment arm.

The new fund is a successor to India 2020 Fund I, which raised a $100 million corpus in 2008.

OPIC’s commitment is among its largest commitments to an Indian PE fund in recent times, added the person cited earlier, requesting anonymity.

Some of the other funds in which OPIC recently invested in include CX Partners’ Mezzanine Fund and Quadria Capital, which is raising an India and Southeast Asia focused healthcare fund.

OPIC said in a statement that “long-term growth capital to support middle market companies is still difficult to come by” in India and investment in fund will help in “advancing entrepreneurship and job growth.”

Lighthouse Funds’ executives declined to comment on ET’s queries on the investment.

The company was set up by Mukund Krishnaswami, former executive of Lehman Brothers’ private equity team and W Sean Sovak, former senior executive at New York-based investment bank WP Carey & Co. The fund has been investing in India since 2006 and also counts Brian Larcombe, former global CEO of UK-based and LSE-listed private equity fund 3i Group, as an advisor.

The new fund comes at a time when sentiment regarding Indian private equity and venture capital has just started to revive. Sixteen India-focused PE/VC funds have raised raised $3.5 billion since the beginning of 2014, compared with $1.2 billion raised by 13 funds in 2013, according to research firm Preqin.

However, limited partners or LPs, which invest in PE/VC funds, have become extremely selective and it has been a tough road for several firms such as Lighthouse Funds since fundraising cycles have stretched to 24-36 months.

“Fundraising for India has become more difficult as LPs have intensified their scrutiny of who they trust with their fund commitments. They are now looking much more closely at factors like team stability, GP (general partner) track record and investment philosophy,” said consulting firm Bain & Co’s India Private Equity Report 2014.

(As published in The Economic Times 15th Dec 2014)

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