Here’s some good news amid the havoc wreaked by the terrorists in Mumbai. Leading private equity firm Actis has closed a $2.9-billion private equity fund, of which about $1 billion is likely to be invested in Indian companies over the next four years.
Actis’ success bucks the trend among funds that have generally been finding it difficult to raise growth capital.
The Actis Emerging Markets 3 fund was targeting a corpus of $2.5 billion and managed to raise $400 million more. This indicates that global investors are confident about growth prospects in emerging economies such as India, Latin America, South East Asia and Africa.
“Actis has been a consistent private equity investor in India for more than 10 years. Over this period, Actis has worked with promoters and management teams to create value for their businesses. This fund-raising is an endorsement of our investment track record,” said Actis partner and South Asia head JM Trivedi.
Actis’ plan to invest $1 billion in India over the next three to four years will bring hope to many companies as the current liquidity crisis had restricted borrowing options for corporates, particularly those in the real estate sector. Also, with valuations coming off highs seen in the two-year equities boom, private equity funds are keen to invest. The broader Sensex has fallen 57% since its peak in July.
The UK-based private equity firm, which was spun off from CDC, was in the news recently after Nilgiri’s Dairy — where Actis has a controlling equity stake — sold its hospitality business as part of a strategy to exit non-core businesses.
The private equity firm was also among the first to introduce the concept of management buyouts in India when in 2005, it sold off the international trading business division of ICI India, which it had acquired earlier.
Actis’ $2.9-billion fund is one of the largest dedicated emerging market private equity funds to close this year and doubles the amount raised by the same firm in 2004.
The investors include a diversified group of 100 investors from across the world, including a number of first-time investors in emerging markets. An Actis statement says that the fund will be used to build a diversified portfolio of between 30 and 40 investments across China, India, Africa, Latin America and South East Asia, typically investing a minimum of $50 million of equity capital in buyout and growth transactions.
However, other private equity firms that compete with Actis say the fund-raising underlines how emerging market buyout groups are able to find money from investors, while US and Europe-oriented funds are finding it very difficult.
A number of private equity firms that have recently had year-ending meetings in the US have received strict directives to focus only on existing transactions and cut costs; there has been a significant slowdown in the number of deals too.
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