Tata Capital, the financial services and asset management unit of India-based conglomerate Tata, has raised $800m for its private equity fund that is expected to close at $1bn by next year.
Tata Capital has five funds: Tata Opportunities Fund, Growth Fund, Innovation Fund, Healthcare Fund and Special Situations Fund.
In an interview to news provider VCCircle, Praveen Kadle, chief executive of Tata Capital, said: "In all [the funds], our main focus is on growth and expansion. So, why did we go for the five themes? If India’s GDP growth amounts to 8-9% every year, then significant growth will happen across many of these areas, particularly in the manufacturing and service sectors. That is why we have created funds where we can participate in the early-growth phase of some companies.
"Also, while we are looking at growth, there may be some companies who have initially planned for growth but haven’t gone for the right kind of mix of equity and debt when it comes to long-term fund-raising and, as a result, are leveraged. So, there are companies where the business model is good, the management is good, but the whole fund-raising is completely skewed in the sense that they have raised money for their projects and expanded the same without any long-term commitments.
"Therefore, they have become highly leveraged and that gives you opportunity to put equity in these companies. Our whole theme has been to provide operational support. We are not just financial investors like most of the private equity funds. Being a fund promoted by a large industrial house like the Tata Group, we can provide significant value in the operational side right from manufacturing, technology, marketing, IT and HR practices. Within healthcare, we are looking at all segments including healthcare facilities, manufacturing in the pharma sector and other related areas.
"Then of course, there is innovation, as a lot of companies are looking at how to go to the next level by bringing in innovative technologies on board. We, therefore, thought that we could also play a role here by providing financial support and using the Tata ecosystem – so that these would fructify into a good growth story.
"Tata opportunity, growth fund and healthcare fund form a part of the overall growth theme and the remaining will go to special situations and innovation."
He added that about half the money would go to non-Tata group companies. Earlier in the month, Japan-based financial services group Mizuho and Tata invested R141 crore ($30m) in outsourcing company Tata Technologies.
Mizuho through its Alpha TC corporate venturing vehicle that aims to bring Japanese companies to Indian firms, and Tata using its Tata Capital Growth Fund I invested the money for a 13.04% stake in Tata Technologies.
Tata Capital Growth Fund raised its first $200m after having begun marketing in July last year. Nearly 40% of the fund, which is managed by Akhil Awasthi, was raised from Indian investors, while overseas limited partners contributed just over a third. The balance is Tata’s capital, according to news provider Mint, while a separate report said Tata Capital and Mizuho would jointly commit a fifth of the total fund size.
Tata Capital is using Mizuho as its placement agent for the fund and the Japan Bank for International Cooperation, the international unit of the state’s Japan Finance Corporation has invested $25m in the fund.