Blue Lotus Capital, an asset management company focusing on a private investments in public enterprises (PIPE) strategy, has raised $15 million for its second outing, the Blue Lotus Capital Multibagger Fund, a senior company executive said.
The new fund will focus on investing in listed small and medium enterprises (SME).
Blue Lotus Capital was founded by S. Harikrishnan, earlier a Managing Director at SME-focused private equity fund Avigo Capital.
“This is India’s first SME-focused PIPE fund. We will look to invest $2-5 million in small- to mid-sized companies listed on NSE and BSE as well as the SME exchanges,” said Harikrishnan, who has more than 17 years’ experience in private equity investments in the Indian market.
The second fund has hit a first close of $15 million, which was raised entirely from domestic investors, Harikrishnan said.
The domestic fund-raising saw participation from several family offices, primarily from south India, engaged in businesses such as technology and pharmaceuticals.
“We are targeting to raise $35 million in total for the fund. The remaining $20 million will be raised from offshore investors. The offshore component will be largely anchored by a European bank, along with equal amount of co-investors,” said Harikrishnan.
The firm had already started scouting for investments and would be closing its first investment soon, he added.
“We have created a completely process-driven approach from identifying companies to investing in them and working with them. We have a panel of operating partners, which comprises industry leaders who have been successful CEOs (chief executive officers) and business leaders, to actively guide the portfolio companies through growth and high-value exit strategies,” said Harikrishnan.
On the investment team, he has partnered with Prashant Patel, a value investor with over 22 years’ experience in capital markets.
The combination of a private equity investor along with a public markets secondary investor is unique as other PIPE funds have largely been private equity spin-offs.
The asset management firm’s first fund, a $20-million portfolio managed for a Chinese family office, doubled in two years.
The strong performance of the Indian stock markets in the past three years on the back of strong liquidity flows, both foreign and domestic, has drawn interest from several private equity fund managers. In 2015, Gulpreet Kohli, former ChrysCapital managing director, raised a maiden $100-million fund—Mylen India Growth Capital—to invest in small and mid-cap listed firms.
Earlier this year, former TPG Growth India head Varun Kapur and Rajesh Singhal, former principal managing partner at PE firm IBOF Investment Management, launched a Rs500-crore fund to invest in public markets.
Fund-raising is also helped by a stronger domestic limited partner (LP) base. Investors in private equity and venture capital funds are called limited partners.
According to Bain and Co.’s India Private Equity Report 2017, even as fund-raising slowed in Asia-Pacific in 2016, India-focused fund-raising saw an 8% increase. A significant driver were alternative investment funds (AIF), which more than doubled their contribution to 41% of total funds. Overall, AIFs raised a total of $2.4 billion, the report said.