Focused entirely on domestic automotive components industry, IFCI Venture Capital Funds Ltd is launching a private equity fund in association with German consultancy UBF-B worth €100 million (about Rs 550 crore).
The fund managers plan to invest the initial corpus of €100 million in about 30 companies which are at the bottom of the growth curve. “Strong corporate governance is a pre-requisite for the firm to attract investment from outside,” said Mr Rajeev Mukhija, Deputy General Manager, IFCI Venture Capital Funds.
The fund, which will have a life of 10 years, is anticipated to have its first closing on March 31, 2008. It will be constituted as two-tier hybrid fund structure with Indian investors contributing in India Domiciled Trust Fund and international investors contributing to Overseas Domiciled Limited Liability Company.
“We will base the Overseas Domiciled Limited Liability Company in either Cyprus or Mauritius where foreign investors can enjoy tax benefits. We are targeting €40 million from the overseas investment, while the rest would be from Indian investors,” said Mr Mukhija.
IFCI has already given in principle commitment to contribute €30 million (Rs 165 crore) towards 30 per cent of the corpus of the fund. UBF-B has proposed to obtain commitments of amount not less than €40 million. As per an estimate, the size of the domestic automotive industry is projected in 2016 to be $122-159 billion. This translates into a contribution of around 10 per cent of the country’s GDP by the auto industry in 2016.
The fund is being launched to empower automotive component manufacturing companies scale up for the world markets. It will also encourage the investor companies tread the growth curve at an accelerated pace and enhance the value creation of various stakeholders.
The fund will be jointly managed by IFCI and its German partner. IFCI will carry out due diligence and local value addition, besides acting as office of the fund.
UBF-B will provide inputs for steering the invested companies through their growth phase and strengthen their business development efforts.
Source: Money Control