Avigo Capital achieves first close of third fund at $150 mln

Avigo plans to invest in 12-14 companies from the new fund, and looks to increase the deal ticket sizes.

Avigo Capital Partners, a Delhi-based private equity fund focused on mid-market companies, has raised $150 million as the first close of its third fund.

The fund, called Avigo SME Fund III, is planning a final close at $250 million by the second quarter of this fiscal year, Achal Ghai, Managing Partner, Avigo Capital Partners, told VCCircle.

The fund saw seven lead investors. All the existing limited partners (LPs) of the second fund – which include Honk Kong’s Squadron Capital, UK’s CDC Group, Australia’s Aria Pension Fund (represented by Macquarie, Hong Kong), IFC and Export Development Canada – have invested in this fund. The fund has two new institutional investors – US based Siguler Guff and UK’s PPM (Prudential Portfolio Managers). While the existing investors have put $100 million in the fund, the rest $50 million has been raised from new investors.

This close makes funds under its management just shy of $400 million. Avigo raised its second fund of $125 million in 2006

The private equity fund, which has been on the road for its third fund since September last year, is in advanced stages of talks with two other institutional investors to raise the remaining corpus, said Ghai. Avigo has been active in the Indian private equity space since 2003.

Some of the companies in Avigo’s portfolio include fashion retailer Spykar, material handling company Tecpro Systems, packaging firm Bharat Box Factory, E-governance services firm Comat Technologies and turnkey services provider Get Engineering and Construction.

Avigo plans to invest in 12-14 companies from the new fund, and looks to increase the deal ticket sizes from earlier $5-7 million to $7-10 million. The fund will continue to focus on same sectors like industrial manufacturing and services, engineering, contracting, and infrastrucuture related manufacturing and services.

“We have small portion of the fund, about 10-15%, through which we may look at emerging sectors like education, media, speciality retail and rural services,” said Ghai. Avigo, which has a sixteen member team, plans to add two more member to the Mumbai team.

Difficult Fund Raising Environment

The fundraising market is getting tougher as typical limited partners like pension funds and endowments, which account for a major chunk of the alternative investment markets, are scaling back their investments.

In such times of liquidity crisis, when LPs are suffering from stretched allocations and shortage of capital, they are now trying to negotiate with GPs (General Partners) on the share of profits and the fees that the fund managers can take back home. A few are also asking for the validation of the 2:20 fee structure if the fund has been raised to invest in publicly listed companies only.

The funds that have recently announced a close in India are all experienced private equity managers. These include Jacob Ballas, which closed $440 million fund last year. Actis closed its emerging markets fund at $2.9 billion, from which $1 billion will be invested in India over a period of 3-4 years. Mayfield also announced a close of $110 million India-focused fund.

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