IDFC Alternatives, the private equity arm of IDFC Ltd, is on sale.
On 28 April, finance company IDFC Ltd announced on the stock exchanges that it had sold its infrastructure-focused fund to US-based private equity fund Global Infrastructure Partners India (GIP) for an undisclosed sum. With this deal, IDFC has sold off the oldest Indian infrastructure fund in the country which had, so far, deployed $1.8 billion. And it won’t be long before multi-asset manager IDFC Alternatives is completely disposed of as well.
That’s not all. The general private equity fund and the real estate fund are also under sale and should be concluded in the next few months. As of today, IDFC Alternatives has assets under management (AUM) of $3.6 billion across its various funds. “The general PE fund and RE fund are in the midst of a transaction with Investcorp which would be closed in the next three to four months; it is undergoing regulatory processes,” says a person familiar with the matter who is not authorised to speak to the media. Investcorp is a Bahrain-headquartered private equity fund.
With this deal, MK Sinha, who headed the overall business as managing director and chief executive officer of IDFC Alternatives, will lead the infrastructure piece at the GIP office. The respective heads of the existing funds will also move on to the new fund house.
IDFC Ltd and GIP declined to respond to a detailed questionnaire sent via email. Investcorp is yet to respond to email queries sent to the company on 18 July.
Both these deals are a gateway for GIP and Investcorp to enter the Indian market where they do not have any standalone presence. Safe to say, India continues to be an attractive market for foreign investors.
Apart from the sale of these funds, IDFC Alternatives has recently concluded a secondary deal. Its existing investor, CDC Group Plc, the development finance institution owned by the UK government, has bought out some of the limited partners in the fund at a discounted value, says the first person mentioned above. Limited Partners or LPs are investors in a private equity fund. In an emailed response, CDC confirmed the buyouts but declined to provide any further details due to confidentiality agreements.
This is obviously not a happy outcome.
For over a year, employees of IDFC Alternatives have seen this coming. The sale processes, according to the individual mentioned above, were initiated last year when IDFC decided to refocus its energies on banking. But the reason isn’t IDFC Bank alone. Over the last few years, the capital-raising activity of the fund had also slowed down. Anyone in the funds business knows how important it is to keep raising and deploying capital at a rapid pace.
According to Bain & Co, in 2015-2016, over 491 private equity funds had invested in India as compared to 474 funds between 2014-2016.