DEALS INDIA: Reliance Equity To Raise Money For New Fund

Top Quote MUMBAI (Mint)--Reliance Equity Advisors (India) Ltd., the private equity arm of the Anil Ambani-led Reliance Group, plans to start a $250 million-$300 million fund by the end of the year. End Quote
  • (1888PressRelease) July 01, 2011 - MUMBAI (Mint)-- "The fund will be raised from overseas investors," said Ramesh Venkat, chief executive of Reliance Equity.

    The company is currently investing from its $220 million domestic fund which raised money from institutional investors and high-networth individuals.

    "We intend to deploy about 60% of this fund by the end of the year," Venkat said.

    While the domestic fund-raising market has been favorable for fund managers, raising funds overseas remains a challenge. Investors in these funds, or limited partners, have turned cautious and are laying down tougher terms for investments and questioning fund management teams on their ability to keep promises.

    Apart from these, investors are looking at factors such as whether a fund is corporate-backed or independent. Some limited partners prefer independent funds as corporate-backed funds are sometimes perceived to have conflict of a interest with the parent.

    "About 10% of the [limited partners] that invest in Indian [funds] will say no upfront if you are a corporate-backed fund," Venkat said. However, a majority, more than 75%, of the limited partners are willing to invest in a corporate- backed fund if they are satisfied with its governance structure, he said.

    "Another concern that investors or limited partners have is that fund managers have raised large funds and have not been able to deploy them," said Hetal Gandhi, managing director at Tano India Advisors Pvt. Ltd., a private equity firm.

    At least 117 private equity and venture capital funds are raising money to invest in India, according to data from Preqin Ltd., a U.K.-based researcher which tracks the alternative investment market.
    Reliance Equity has deployed about one-third of its local fund. Investments include Pathways World Schools and Shankara Infrastructure Materials Ltd.

    Reliance Group has also expanded its portfolio in its asset reconstruction business with Reliance Asset Reconstruction Co. Ltd.

    "Last year (fiscal 2011) was the best for Reliance Capital's asset reconstruction business," said Venkat, who is also a director of Reliance Asset Reconstruction.

    The firm picked up bad loans worth around INR7.84 billion in the 2011 fiscal year at steep discounts from Indian Bank, Vijaya Bank and Canara Bank. Before this, Reliance Reconstruction had about INR1 billion of assets.
    Other companies which are looking for nonperforming loans and assets haven't had similar luck, and they say they didn't make any significant additions to their asset base in the past fiscal year because of a mismatch in expectation between banks and these entities on the pricing of these assets.
    Reliance Reconstruction expects an internal rate of return of 15%-20% over the next three to five years, Venkat said.

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