Private equity (PE) fund manager Multiples Alternate Asset Management on Tuesday said it has raised a $430-million (Rs 3,655 crore) continuation fund, mainly from global investors HarbourVest Partners, Hamilton Lane, LGT Capital Partners and TPG NewQuest. The capital was raised to acquire stakes in three private firms – Vastu Housing Finance Corporation, Quantiphi and APAC Financial Services – from Multiples Fund II, providing liquidity to existing investors. MD & deputy CEO Sudhir Variyar talks to Raghavendra Kamath about the fund manager’s strategy and the outlook on PE investments.
What is the idea behind the continuation fund?
It (the fund) is a win-win for all parties. Limited partners (LPs) normally give money for 10-12 years. Investments take time to evolve. As a fund manager, we would like to hold them. In general, most of the LPs want liquidity after the fund life. In our case, we had given LPs options to continue or take liquidity. Majority have taken liquidity, and some have rolled it over.
Do you think continuation funds will gain ground?
They will definitely catch up. PE is an illiquid asset class. You should have multiple avenues to provide liquidity to investors such as IPO, PE-to-PE sale and so on. In continuation funds, a new set of LPs will come in. So, we believe it will be an established form of providing liquidity to LPs.
Do you think exits through IPOs are becoming a challenge due to the volatility in the stock markets?
No. In India, exit is not a challenge for good companies. If you create a valuable company, there is enough appetite in the market. Especially, IPOs backed by PEs are becoming a rule rather than exception due to better corporate governance, institutional ownership and other factors. We will continue to exit through IPOs.
Are you eyeing any new fundraise this year?
No. We are investing out of the fourth fund, which we raised last year. We take 2-3 years to invest. So, we have enough dry powder left. We believe a good GP (general partner) continues to scale up where entrepreneurs are scaling up. We are always in conversations with entrepreneurs, investors and scale up appropriately with markets.
Any particular sectors which you are betting on now?
By the nature of our business, sector choices don’t change from year to year. Multiples focuses on core sectors of financial services, pharma and healthcare, consumer and technology, and more recently, the green economy. We might do small tweaks, but our core sectors will remain the same. We try not to respond to noise, so, no drastic changes.
Do you think dealmaking is slowing down due to US tariffs and geopolitical tensions?
In an uncertain environment, sellers and buyers take time. In certain sectors, due to global volatility, dealmaking will be little slower. For instance, in pharma, there is a lot of noise. Many participants also may have specific situations. Say, you are a global LP, investment committee (IC) may be constrained with various other matters and therefore, the ability to take proposals to your IC may be constrained. Any volatility, anything that will change the scenario, we want to see how things will pan out. It is not a slowdown, it’s a recalibration — needs more scenario thinking and analysis. It will cause some moderation, but that’s not always bad.
But investing in India, things are quite good. India is a large mature diverse economy, with its stability, growth and value creation proven over years. The other big change in the Indian market is that we are not dependent on foreign capital. A lot of domestic capital is available. And that will give further stability to markets.