Motilal Oswal raises $550 mn for fourth India PE fund

 Motilal Oswal raises $550 mn for fourth India PE fund

Motilal Oswal Alternates (MO Alts), the private equity investment arm of Mumbai-based Motilal Oswal Financial Services Ltd, said Monday it has completed the fundraising process for its fourth investment vehicle, garnering Rs 4,500 crore ($550 million).

The firm had launched the India Business Excellence Fund IV in July last year hoping to raise Rs 4,000 crore ($550 million then) and later upped the target in rupee terms.

The fund has been primarily raised from domestic high-net-worth individuals (HNIs) and family offices. With this fund, the cumulative assets under management raised under MO Alts, including for growth capital and real estate investments, has touched Rs 14,000 crore.

In the Indian private equity space, where traditionally most of the capital has been sourced from international investors, MO Alts has been one of the few PE firms that has raised a substantial portion of the funds from domestic investors thus creating a strong ecosystem for this asset class in India. Approximately 75% of the capital in aggregate across all the funds has been raised from domestic investors across 55 cities in the country.

Vishal Tulsyan, MD and CEO of MO Alts, said: “For India to achieve its dream of $10 trillion economy by 2030-2032, private capital will play the most pivotal role, and towards this it is important that we create a strong ecosystem for raising domestic capital and become somewhat self-reliant.”

He noted that over the past decade, more than 50% of private capital invested in China was raised locally. “For India, that number is abysmally low, but over the next 10 years, if we (industry and government) put in effort towards this direction there is no reason why we will not be able to achieve similar numbers,” he added.

International Finance Corporation, the World Bank Group’s private-sector investment arm, had approved an equity investment of up to $35 million in the fund and had also proposed to co-invest up to $20 million in the fund’s portfolio companies.

The fund, led by Vishal Tulsyan and Raamdeo Agrawal, seeks to invest in 10-15 companies in consumer, financial services, life sciences and niche manufacturing sectors.

The sector-agnostic fund also hopes to evaluate tech-enabled businesses and expects to deploy 10-15% of its capital there.

The new fund has already made two investments. It invested in Pathkind, a diagnostic chain promoted by the Mankind Pharma group, and Simpolo, one of the largest players in India’s premium tile segment.

In addition, there are two investments where definitive agreements have been signed. MO Alts expects to commit around 50% of the fund by March 2023.

The PE firm launched its first fund in 2007, raising $115 million. This vehicle invested in 13 companies. The fund made six-fold returns and clocked an internal rate of return of about 27% at the gross level in rupee terms.

Some of the notable investments via Fund 1 include AU Financiers (now called AU Small Finance Bank), Dixon Technologies, Minda Industries and GR Infraprojects. Many companies in terms of valuation over a period of 10-15 years have become over 100x of the entry valuation of MO Alts, the firm says.

Other notable investments made by MO Alts have been in companies like facility management and business services company Updater Services, Molbio Diagnostics, fintech Kreditbee and snack brand Happilo.

The second fund raised $155 million in 2013 fund and made 11 investments. The third fund raised $320 million in 2018 and is almost fully committed across nine investments.

Vivek Sinha

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