Baring PE Asia raising India-dedicated credit fund

Mumbai: Baring Private Equity Asia (BPEA) is raising a new India-dedicated credit fund of Rs500 crore with a greenshoe option of Rs250 crore, two people familiar with the plans said on condition of anonymity.

The private equity firm had recently set up its lending business in India.

A greenshoe option allows a firm to retain the extra money in case it receives more investment than originally planned.

According to the people cited above, the first close of the new fund is expected in the March quarter, following which it will start investing money from the new fund.

BPEA is also planning to raise a new offshore credit fund of around $500 million which will co-invest with the India fund apart from making independent investments of its own, the persons cited above added.

BPEA declined to comment.

BPEA is one of the largest and most established independent alternative asset management firms in Asia, with total investments and committed capital of over $10 billion. The firm has been investing in Asia since it was formed in 1997 and has over 100 institutional investors which includes sovereign wealth funds, pension funds, endowments, foundations, insurance firms and family offices.

Last year, BPEA acquired Fund I, a dedicated credit fund of Religare Global Asset Management’s, and hired the entire team managing it. In November, it also appointed Kanchan Jain, CEO and principal managing partner, Religare Credit Advisors LLP, to head its credit business in India.

Fund I has made 21 private debt investments till date with a total transaction value of $160 million. The BPEA Credit team will continue to manage Fund I throughout its remaining life, according to the people cited above.

The entry of BPEA into credit business marks the growing interest of global and domestic PE funds into the private debt business keen to tap the lending space between conventional bank funding and debt capital markets.

One of the early movers to the structured credit business in India, global PE giant KKR & Co. in its recent report titled Outlook for 2017: Paradigm Shift said, “As we look ahead towards 2017’s investment opportunities, we are most excited by what we see in private credit. Despite the threat of future regulatory changes, the illiquidity premium still feels appealing, a feature we do not expect to shift in the near to medium term.”

In India, KKR India Alternative Credit Opportunities Fund (with a corpus of Rs1,500 crore), the first alternative investment fund raised by KKR India in 2013, has seen an average internal rate of return (IRR) of approximately 18%, Mint had earlier reported.

KKR has invested close to $3.5 billion through structured financing in about 62 companies in India, including GMR Holdings Pvt. Ltd, Avantha Group and Apollo Hospitals Enterprise Ltd. It is also in the process of raising its second credit fund worth Rs1,500 crore. Others who have ventured into structured credit business in India include AION Capital Partners (a joint venture between Apollo Global Management Llc and domestic private equity firm ICICI Venture) which has raised $825 million in committed capital.

In India, BPEA has so far been focused on buyout opportunities.

In 2015, it acquired a controlling stake in CMS Info Systems Ltd, one of India’s largest cash-management companies, from Blackstone group for $301 million.

In 2013, it acquired a majority stake in software and IT services company Hexaware Technologies for Rs1,687 crore in one of the biggest transactions in India’s information technology (IT) sector in recent years.

Till recently, the PE fund was also among the top contenders to acquire ICICI Home Finance Company; the talks, however, were not successful.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.