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Mon, 14 Mar 2022 | VCCircle
IIFL AMC to expand strategy, investor base as it mops up ₹2,600 cr in pre-IPO fund

IIFL AMC to expand strategy, investor base as it mops up ₹2,600 cr in pre-IPO fund

IIFL Wealth and Asset Management (IIFL AMC), backed by Fairfax Financial Holdings Ltd, is raising ₹2,600 crore (around $340 million) in its pre-initial public offering (IPO) series fund as it plans to expand its investor base to institutional investors, its senior executive told VCCircle.  

“We have already received commitments for ₹2,600 crore for pre-IPO special opportunities fund series 9 and 10. Currently, our investor list is domestic family offices and high networth individuals (HNIs). We would like to expand this and build relationships with institutional investors,” said Anshuman Goenka, Head, Private Equity at IIFL Asset Management Ltd in an interaction.  

He further said, “We have LP (limited partner) relationships across some of our other products that we will extend to the private equity space. Our appeal is our track record. Our domestic investors have expressed an interest in co-investments.”  

In the Special Opportunities Fund series 1-5, IIFL estimates to return almost 100% of the capital deployed within five years of the fund to its investors by June this year. Since the launch of its pre-IPO series fund in 2017, the asset manager has raised around $1 billion (approximately ₹7,600 crore).  

In its latest round of pre-IPO fund, which spans to series 9 and 10, IIFL AMC has mopped up ₹2,600 crore and has deployed ₹1,200 crore (around $156 million), across seven investments.  

“Internal rate of returns (IRRs) for some of the early funds have been between 17% and 20%. More recent series have done 24-25% IRR,” Goenka said.  

IIFL Private Equity, part of IIFL AMC (previously called India Infoline Asset Management Company), has been active in the private equity ecosystem since late 2015.  

The domestic investor manages around $3 billion (₹23,000 crore) of private equity investments investing in early-to-late-stage investments across consumer, technology, financial services and healthcare space.  

In the last six months, its investments include SK Finance, Care Insurance, Nephroplus, Aether Chemicals, Vastu Housing, and the latest bet being TA Associates-backed OmniActive Health Technologies early this month.   

“In our portfolio, 4 to 5 companies are considering an IPO. Of these, Bikaji Foods International, Northern Arc and Protean eGov Technologies (formerly known as NSDL e-Governance Infrastructure Ltd) have already filed their DRHP. SK Finance is embarking on strong growth with its equity funding and credit upgrade,” Goenka stated.  

Over the last 12 months, the asset manager has raised around ₹5,000 crore ($670 million) in tech funds and ₹2,600 crore in pre-IPO funds.  

The tech fund, which marked its final close in January, has made investments in 16 companies with 14 of them seeing an appreciation by raising further capital at higher valuations.  

It further has three funds for early-stage investments, Seed 1, Seed 2 and RISE.  

“Across these funds, we have raised, about ₹2,000 crore and made 20 investments. This portfolio is tracking a 3x return and several exits should happen in the next 12 months. Thereafter, we will consider another fund with a similar strategy,” Goenka said, adding it would be growth funds.  

Typically, growth funds tend to be of a longer tenure of about eight years. “We want to give the company a longer horizon to blossom in the future. The (current) ticket size is around ₹50-100 crore and we will be inching this upwards to around ₹80-200 crore in the next fund,” he explained.  

Mid-market PE firms, which typically have a corpus of around $500-700 million (around ₹3,800-5,300 crore), tend to deploy the money over a period of three to four years.  

IIFL AMC is a part of the Mumbai-based IIFL Group’s wealth and asset management business, IIFL Wealth Management Ltd, which advises over 10,000 HNIs and wealthy families handling aggregate assets under management (AUM) of more than $44 billion.   

The firm counts private equity firm General Atlantic and Canadian investment firm Fairfax owned by Indian-origin Canadian billionaire Prem Watsa among its key investors at 21% and 13.64% of equity ownership, respectively, as of December end 2021.  

While Goenka, formerly with Investcorp India (erstwhile IDFC Private Equity), is bullish on the alternative investment space, IIFL PE has been prudent in its filters while making investments. He listed down three key criteria of profitability, competitive positioning and familiarity with management while betting on any company.   

On the bumper valuations witnessed over the last one year, Goenka believes that the quality of businesses and management is critical to investing. “Further, we select timings to avoid valuation bubble. At the same time, I wish to emphasize that we are very selective,” he concluded.