PE players line up slew of mezzanine funds for Indian market
New Delhi: Private equity (PE) players are lining up a bundle of 'mezzanine funds' - debt-dominated instruments with an 'equity sweetener' - for the Indian market. These funds basically provide medium-to-long term capital to promoters without significant ownership dilution. These funds with minimum risks are widely predicted to gain favor with mid-cap Indian firms, where promoters would relish the opportunity of not ceding considerable shareholding while raising funds. The company will have to give out only a periodic interest to the investor. India's PE firm ICICI Venture is in the process of closing the country's first mezzanine fund. ICICI Venture's 'India Advantage Fund VII' would offer $110 million in its first round of fund raising, over half of which has already been committed by limited partners. The fund is among the single largest country-focused mezzanine fund in Asia's emerging markets and the corpus could be scaled up to $1 billion in the second round of fund raising, says industry sources. More over, Franklin Templeton Investments' PE arm Darby Overseas Investments has launched the Darby Asia Mezzanine Fund II, which has bagged institutional commitments of $300 million and committed investments through an affiliate in Faridabad based Escorts Construction Equipment. Kendall Court Capital Partners' second fund is also said to be eyeing investments in India. Since mezzanine funds contain debt, or debt-like instruments, those receiving the capital investment have to make interest payments, therefore generating significant current income for investors, especially in case of long-gestation investments, such as in the infrastructure sector.