Fresh LP commitments to India PE, VC funds slump but dry powder near record high

 Fresh LP commitments to India PE, VC funds slump but dry powder near record high

Fresh commitment by Limited Partners (LP) to Indian private equity and venture capital funds rose at the slowest pace ever in the first quarter of 2021, as the uncertainty related to the second wave of the Covid-19 pandemic likely held back investors.

The total sum committed by LPs to PE and VC funds registered with the capital markets regulator Securities and Exchange Board of India (SEBI) increased barely 1.5% during the three months through March. This is the slowest rate since SEBI started collating data for alternative investment funds.

Fresh LP commitment to SEBI-registered Category I and II funds rose just Rs 6,016 crore for the January-March period. This came on the back of almost Rs 40,000 crore committed by LPs to India PE-VC funds in the previous quarter.

Category I and II alternative investment funds include sector-agnostic PE vehicles, infrastructure and real estate funds, besides private credit and venture debt funds.

While fresh deployment didn’t maintain the frenetic pace of the fourth quarter of 2020 when it hit an all-time high of over $2 billion, it was still way above the average quarterly mark at Rs 12,428 crore ($1.7 billion).

The data capture only funds registered in India under SEBI’s Alternative Investment Fund (AIF) regime and exclude international-domiciled fund houses. To that extent, this doesn’t reflect the entire alternative investment climate in India but only outlines broader trends.

Meanwhile, dry powder—or the capital available to be deployed including the quantum that PE-VC funds have not yet ‘called in’—declined 2.5% to Rs 2.42 lakh crore (about $33 billion).

Nearly $4 billion of this is the money that has been ‘called in’ or raised from LPs but not yet deployed or invested, as per SEBI.

The overall dry powder may include components of funds that have not formally announced a closure but have received LP commitments. For instance, Renuka Ramnath-led Multiples PE has been on the road for its third fund that has been eyeing a corpus of as much as $900 million.

It is yet to make a formal closure even though it has got some large commitments from various investors including around $120 million from India’s quasi-sovereign wealth fund NIIF.

The Capital Quest