Private Equity Funds in India

PE Funds Based on Investment Style

VC Funds

• Stage – Early stage investors, who back companies once they demonstrate product market fit or sometimes even earlier – typically first set of institutional investors after seed funds or angels.
• Round – Participate in Series A and might go on till Series C.
• Funds in India – Some of the better-known VC funds in India include Matrix, SAIF Partners, Sequoia, Lightspeed, Accel, IDG and Kalaari Capital

Business model of Investment Companies

VCs invest in businesses which have the potential to disrupt the market or create a new market thereby creating immense value along the firm. Some of the early concepts heavily backed by VCs in India include e-commerce (B2C, B2B, social commence, DTC businesses etc), aggregators (transport, hospitality), hyperlocal (food delivery, grocery delivery and other O2O series), edtech, fintech etc.

Investment size and return expectation

• Depending on the size of the fund and round of investment, the cheque size could vary from $1mn to $10mn with focus on smaller ticket in earlier rounds and progressively bigger rounds as the business expands.
• Risk and exits – High risk businesses since they are very early stage businesses with slim chances of success. Exits are typically by secondary sale to either bigger funds (Growth PE funds) or acquisitions by way of cash buyout or share swap by either bigger players in the same space or corporates which see synergies with their business
• Returns – Typically aim to make 8x-10x returns on each investment. Sometimes a couple of investments can even manage to return the entire fund due to the high risk – high return nature of the business.

Growth Equity Funds

• Stage – Mid to late stage investors, who back companies once they demonstrate attractive unit economics and path to profitability. Provide growth capital to rapidly scale businesses and replicate operations across multiple products/geographies etc.
• Round – Typically come in from Series C onwards
• Funds in India – Some of the better known growth funds in India include – TPG (growth), Carlyle (growth), Warburg Pincus, General Atlantic, Kedaara, Temasek, Multiples PE, Lighthouse, ICICI Venture, True North, ChrysCapital, TA Associates, Sequoia (Growth), Goldman Sachs (PIA)

Business model of Investment Companies

Growth PEs invest in high scalable models which are economically proven with high potential to expand a category or rapidly gain market share

Investment size and return expectation

• Depending on the size of the fund and round of investment, the check size could vary from US$30 Mn to US$ 100 Mn
• Risk and exits – Moderate risk businesses with focus on execution of business plan. Exits could vary depending on industry and stage but typically include secondary sale to either bigger funds (Buyout funds or other are growth funds) or IPO in public markets
• Returns – Typically expect to make 3x-4x on investments with an expectation of generating 20-25% USD IRR.

Buyout Funds

• Stage – Late stage investors, who back mature companies and look to take a controlling stake in the company.
• Round – Late stage – many times it includes acquisition non-core businesses of large conglomerates in India. Given the limited depth for mature companies, buyout funds in India may actively consider public market investments as well.
• Funds in India -Some of the better-known buyout funds in India include – Partners Group, Blackstone, PAG, TPG Capital, Carlyle (buyout), Baring PE Asia, KKR, Brookfield PE, Advent. Apax Partners and Bain Capital

Business model of Investment Companies

Late stage mature companies with strong operating metrices and potential for steady cash flow generation.

Investment size and return expectation

• Depending on the size of the fund and round of investment, the cheque size could vary from $200mn to $1-2bn
• Risk and exits – Relatively lower execution risk. Focus is on driving operating synergies, expanding margins and continuing strong growth. Exits are typically by secondary sale to either bigger funds or public market exits (ie. IPO)
• Returns – Typically expect to make 2.5x-3x with 20-25% IRR on the equity check.

PE Funds Based on Origin

Domestic Funds

Funds across stages which are headquartered in India. The GPs for these funds are typically based out of India and directly control investment decisions and fund raising. These funds generally only have India as the region of investment. Examples include – Kedaara Capital, True North, ChrysCapital, Multiples PE, and ICICI Ventures.

Global Funds 

Funds which are headquartered outside India and have an India office overseeing investments in the region.  The investment decision is generally governed by the Investment Committee (IC) which includes senior investment professionals from other global offices. Other activities like fund raising are undertaken by a central team and not necessarily driven by the India team. These funds have multiple offices and make investments across different regions globally. Examples include – TPG, KKR, Blackstone, Bain Capital, Advent etc.