IndAsia Fund

completed

Project DescriptionThe fund will target companies in the new economy as well as existing companies which have developed under the protected domestic environment and which now need help to adapt to the more liberalized and globally competitive environment as the Indian economy opens up. In addition to growth capital, the fund will provide value addition through guidance for corporate strategy, marketing, professional management, corporate goverance, etc. The AMP-IndAsia Fund will assist such companies to refocus towards the global markets, and will have the opportunity to exit when these companies make fund-guided public offerings. To create an alternative exit strategy, the fund will build networks from companies in the same sector, to capture synergies and create value. The goal is to form synergistic groups attractive to outside buyers from component companies that individually would not attract outside interest. The further liberalizations, in addition to the current economic recovery and recent regulatory reforms for private equity funds, signal an enabling environment which is becoming increasingly favorable to unlisted funds in India. Developmental ImpactPrivate equity funds are unique amongst financial intermediaries in that they have a small portfolio (up to 5 investments per manager) upon which very specialized and focussed attention is lavished by ex-entrepreneurs with considerable industry or strategic experience, as opposed to a very large portfolio which is monitored passively. In other words, these funds add value in numerous areas such as strategy, corporate governance, finance, IT, human resources, and marketing, and therefore play a decisive role in determining the success or the failure of the company in question. Late-stage funds, such as this fund, play an essential role within the panoply of stage-wise funds, as they focus on facilitating exits (preparing for IPOs, obtaining SEBI clearance, market timing, further private placement, etc), whereas earlier-stage funds put their emphasis on start-up issues (developing a business plan, implementation, etc). Funds which have developed an expertise in a particular stage will be able to add much more "timely" value to that company than most other financial intermediaries. Without late stage funds, early-stage funds sometimes have difficulty exiting from their investments. In this way, this fund will complement the work currently being done by the earlier-stage funds. Lastly, investing in funds helps to further develop the fund management industry in India, which is now ten years old, but which has considerable ground to cover before reaching the level of professionalism seen today in countries such as the US, UK, etc.IFC RoleIFC is playing several roles in this fund. Firstly, over the past two years, IFC has played a key role in formulating the value addition late-stage investment strategy of the fund, such that the fund will respond to the developmental needs of both the market and the private equity industry. This role is continuing as IFC cooperates with AMP in advising IndAsia Advisors on value addition techniques. Although there are several private equity funds focussing on India now they are principally looking at the IT sector and consequently the late stage segment is underserved. Secondly, IFC has already begun to share the lessons learned from its nine existing funds in India with the two sponsors, as IFC has been involved in private equity in India longer than both AMP and IndAsia''s partners. Thirdly, IFC involvement will assist the sponsors with mobilizing third party funding by enhancing the credibility of the fund with other investors, given IFC’s experience with structuring and overseeing funds in emerging markets.