Carnelian Capital plans PE foray with Rs 2,000 crore fund

Mumbai: Carnelian Capital is entering the private equity business with plans to launch a ₹1,500-2,000 crore fund, betting that a shortage of growth capital for mid-sized Indian companies has created an attractive investment opportunity that larger buyout firms are increasingly overlooking.The investment manager, which oversees about ₹18,300 crore across portfolio management services and alternative investment funds, plans to raise the maiden fund in the next 12-18 months.

It will focus on profitable companies seeking ₹100-300 crore of growth capital, a segment the firm believes has become underserved as private equity funds have grown larger."The white space is in companies looking to raise ₹100-300 crore.

There are very few meaningful funds catering to that segment," said founder and chief executive Vikas Khemani.He said that most large domestic and global private equity firms now prefer transactions of ₹1,000 crore or more because of the size of their funds, leaving smaller but established businesses with fewer financing options.

At the same time, the initial public offering (IPO) market has shifted towards larger offerings, making public listings less viable for mid-sized companies."Earlier these companies could access the IPO market, but now IPO sizes have moved to ₹800-1,000 crore.

That has made it difficult for them to raise capital through public markets," Khemani said.Carnelian Capital's fund will invest in profitable businesses with proven business models, targeting growth-stage and pre-IPO companies while avoiding early-stage venture investments and buyouts.

The portfolio will span sectors such as manufacturing, healthcare, consumer businesses and innovation-led companies, with about 15 investments and ticket sizes ranging from ₹50-150 crore.Khemani said the firm has already identified investments and warehoused some deals that will be transferred into the fund after the first close.The fund is targeting gross returns of more than 30% and expects to begin returning capital after about five years.Carnelian Capital will invest about ₹100 crore of its own capital, which is more than 5% of the fund size, alongside investors.

The firm also expects its experience in public markets and capital raising to provide an edge in sourcing and exiting investments. ...