LPs are suffering from investor fatigue in India. Indeed, after a surge of interest in investing in India-focused property funds over the past few years, some GPs are now finding investors less than willing to put their money where their mouth previously was. As a result some fund managers are putting ambitious future fundraising plans on ice.
Jonathan Petit, executive director at London based private equity real estate firm, Catalyst Capital, said that was precisely what had happened to the firm's plans to raise its second Indian property vehicle with Mumbai-based Samsara Capital.
In December last year, PERE reported that the duo planned to raise a second opportunity fund targeting $450 million this year. However after closing its first fund on $99.3 million, below the original $130 million target, Catalyst and Samsara have postponed their plans.
Catalyst and Samsara had appointed placement agent Farragut Capital to take the fund to the market but the message received from LPs was not to rush back so soon. Investors, Petit was told, would rather GPs concentrate on their portfolios rather than going out to raise more money.
Petit said: “We had fully intended to be full steam ahead with this by now. But the mood in the market is restrained. We are not doing anything on this right now as the confidence is just not there. We would have liked to have a prominent foundation or endowment as a cornerstone investor, but there is no point in spending time with those groups as they are currently assessing where they are at with existing investments and holding back from new commitments.”
Petit said the Samsara Catalyst Opportunity Fund II could be revisited after September. He said the joint venture will now concentrate its efforts on asset managing the seven investments it has made for its debut fund, Samsara Catalyst Opportunity Fund I.
Deploying equity from seven investors, the joint venture has invested $6 million for a stake in an infrastructure company in Bangalore; $21 million in a South Indian hotel developer with seven development sites; $19.7 million in a Hyderabad-based developer, which is developing five-million-square-feet of business space; $20 million on a 25-acre development plot in Chennai; $7.5 million on a 70-acre plot in Mysore, Karnataka; $5 million on 16-acres of land in Alibaug, Mumbai and $16 million on a 26 percent stake in a township development in Vijayawada.
Petit's role will now change to focus on managing existing assets and sourcing new asset managing opportunities rather than fundraising. It is understood the firm is close to tying up additional asset management mandates in the country, the agreements for which could be announced this quarter.
This restraint shown by Catalyst and Samsara was applauded by placement agents. Vaibhav Rekhi, director of Savills Capital Advisors, said: “There are some 40-plus investors vying for investor attention and there is lots of fatigue in the Indian market as a result.”
Rekhi said those LPs still willing to invest in the country were looking for two things: track records, particularly in terms of exiting deals and funds, and LPs willing to re-up from previous funds.
“In this market it is a case of putting your head down and making sure the deals you have done do not stretch you,” Rekhi added.
The Samsara Catalyst Opportunity Fund has another six years to run, with Petit admitting the vehicle now expects to return IRRs in the low 20 percent range rather than the anticipated 30 percent.
Petit said, however, returns for the fund would rise again. “Fundamentally I believe in the Indian story. The market will come back,” he said.