Kedaara Capital closes largest India PE fund at $1.74 bn; no single individual investor got allocated more than 6% of fund

Kedaara Capital closed its $1.73 billion fund, Kedaara IV, the largest fund raised by an India private equity fund, said industry executives in the know. This will be its fourth fund in 12 years and was raised in just 4 months beginning last December and would even surpass Chrys Cap’s $1.3 billion Fund IX raised in 2023.

It also comes at a time when several other local and global funds are struggling with fresh commitments from their investors to raise new pools of capital after boom years of fundraising.

About 85% of Kedaara’s new fund was raised from existing backers who are common either in fund three or in at least one of the previous funds. They include the 3 of the largest Canadian pension funds --- CPPIB, CDPQ and Ontario Teachers’ Pension Plan (OTPP). OTPP was also the anchor investor in the first fund. Other common backers from fund three include German insurer Allianz and fund of funds HarbourVest and Asia Alternatives among others.

With new Asian, especially Japanese institutions and Middle Eastern names coming on board, Kedaara chose to diversify the profile of sponsors or limited partners both geographically as well as the types of money that participated --- a wider pool of family offices, endowments and wealth clients. They also restricted that no single individual investor got allocated more than 6% of the fund, said fund executives.


Split geographically, a majority -- 60% of the fund or around a $1 billion was raised from North American investors (Canada, US, Mexico) including endowments like University of Minnesota, family offices and select US state pension plans and a large life insurer – a first timer. The rest was equally divided amongst European and Asian investors including Belgian investment holding company Sofina, and Saudi origin Olayan Group. Even Japanese banks and insurers also joined for the first time.

Kedaara, founded in 2011 by former Temasek and General Atlantic executives, Manish Kejriwal, Sunish Sharma and Nishant Sharma, is one of India's best-known and prolific funds. Its three previous funds raised a combined $2.4 billion between 2011 and 2021 which was invested in 27 Indian companies.

“Given the global challenges (lack of distributions) and how the denominator effect has impacted many LPs, we thought some might drop out and the fund raise would take a better part of the 2024 calendar year, but we had an almost 100% subscription rate,” said Manish Kejriwal, Founder & Managing Partner, Kedaara Capital. The latest fund will be 57% higher than the last fund raised 3 years ago.

The maiden $540 milion maiden fund generated around 40% dollar IRR with 7 of the 9 portfolio companies being fully exited. Two -- Aavas Financiers a home finance company and Spandana -- have already been IPOed and some money taken off the table but with Kedara being the controlling shareholder, it expects full divestments in the coming 24 months.

Others like Manjushree, a packaging company that was sold to Advent, Bill Forge sold to Spanish automotive giant CIE and Parkson’s Packaging sold to another PE peer Warburg Pincus. AU Finance, Manyavaar, the flagship brand of Vedaant Fashion,Vijaya Diagnostics, Mahindra Logistics also got listed through and subsequently fully divested.

The 2nd $800 million fund and third $1.1 billion fund raised in 2017 and 2021 respectively included the buyout of Vishal Megamart where Kedaara partnered with Partners Group to buy the value retailer from TPG which is also poised for an IPO later this year. Other control investments included the recent Dairy Day Ice Cream, Gavs Technologies and ASG Eye Hospitals where GA also co-invested. Last year, the eye care chain took operational control of Vasan Eye Care following a transfer of ownership.

Minority investments from these two funds include Avanse Financial Services, an educational loan company, Lenskart, Care Health Insurance, a subsidiary of Religare Finvest. Portfolio companies from these two funds have improved operationally post Covid and are expected to generate similar returns over their fund lives, the company executives added.

Like the earlier funds, the focus of the new fund will also be on control and minority investment in the chosen sectors and themes. In the past Kedaara has predominantly sourced deals in the financial services, consumer and consumer tech sector and to a lesser extent technology services like SAAS as well as pharma and healthcare services like diagnostic chains.

Amidst heightened geopolitical risks, China is seeing a flight of quality capital that has been looking at India in a much more proactive way in the last few years. Funds like KKR, Blackstone, EQT (formerly Baring PE Asia EQT) are looking to deploy at least $10 billion in India in the next 5-8 years, their top executives told ET in recent interactions.

Last year, India's share of Asia-Pacific private equity deals grew to 23% while China's fell to a nine-year low of 31%, consultancy firm Bain said in a report. However, with marquee global fund names being slow to return cash to their clients and institutional LPs, their ability to make investments by raising new funds have been severely curtailed. This in turn has affected the fund raising capacity of many private equity and venture firms. According to Bloomberg, even Tiger Global Management managed to raise only about $2.2 billion for its latest venture-capital fund, 63% of a $6 billion target and its smallest fundraising drive in roughly a decade. The latest fund is dwarfed by the previous fund that managed a haul of $12.7 billion. Private equity groups globally are now sitting on a record 28,000 unsold companies worth more than $3 trillion, said Bain & Co.