Baring Private Equity Partners (India) Pvt. Ltd (BPEP), the private equity (PE) fund which has traditionally invested in the information technology (IT), healthcare and financial services space, is now planning investments in real estate.
“Apart from the other sectors, real estate will be our new focus,” said Rahul Bhasin, managing partner, BPEP India.
On Thursday, BPEP India along with Matrix Partners India invested Rs157 crore in gold loan company Muthoot Finance Ltd.
In March, it hired Varun Batra, managing director and head of Citigroup India's global special situations group, to spearhead its initiative in real estate. Batra had set up the business in Citigroup and led proprietary investments of $450 million (around Rs2,100 crore) across industries such as retail, hospitality and real estate among others.
The investments will be made from the funds available as Bhasin doesn't have plans to raise a separate real estate fund.
Most PE funds investing in real estate have a separate property-focused fund.
Pranay Vakil, chairman, Knight Frank India Pvt. Ltd, said PE funds investing in real estate need to have country-specific experience. “There are many funds which have raised money to invest in India but haven't been able to fully deploy them.”
BPEP India raised $570 million in 2008 through Baring India Private Equity Fund III Ltd (BIPEF III), almost three times more than fund II which raised $176 million. According to Bhasin, though opportunities are plenty and capital is available, the challenge is in investing at the right valuation and getting a good return.
Some of the companies in BPEP India's portfolio include MphasiS BFL Software Ltd, Msource Inc., Jyothy Laboratories Ltd, JRG Securities Ltd and Auro Mira Energy Co. Pvt. Ltd.
“We have returned $300 million to our investors already and have made 10x return from our first fund, which was just a $30 million fund,” said Bhasin. He is, however, not sure whether the second fund could give similar returns. “I have seen the mortality of PE funds,” said Bhasin.
Apart from real estate, BPEP India will also look at opportunities to invest in public companies. “Though we have traditionally stayed away from PIPEs (private investment in public enterprise), there are comparatively more opportunities in public companies,” said Bhasin.
Vikram Utamsingh, executive director and head private equity group, KPMG, pointed out that many PE funds are looking to do PIPE transactions to balance their return as such deals give them high return within a short period. For instance, Sequoia Capital India, which invested in Nagarjuna Construction Co. Ltd last year made a 2 times return just within six months.
Source: American Chronicle