Launched in April 2011, Pragati will invest in small and medium enterprises in the economically weak states of Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal. Deal ticket sizes will range between $5 million and $10 million and the fund will pick up equity stakes of between 25 per cent and 35 per cent, Narayanan Shadagopan, founder and managing director of Pragati Equity Advisors, which manages the fund, told reporters at a press conference in Mumbai today.

Some of the sectors that the fund will focus on include capital goods, specialty chemicals and waster water management, said Shadagopan. The emphasis will be on growth stage businesses that have the potential to create jobs and improve income levels in the eight specified states. “It is an extremely important investment for IFC. Small and medium enterprises in India’s low-income states are constrained by limited funds,” said Rashad Kaldany, the organization’s vice president of global industries. The companies that the fund would invest in would typically have current revenues at between Rs 50 crore and Rs 150 crore (between $10 million and $30 million) and it will by and large remain sector-agnostic in its focus. It expects to stay invested in portfolio companies for about six years and anticipates most exits taking place through the mergers and acquisitions route.

For IFC, which is an active limited partner (investor in private equity funds) in the Indian market, Pragati is part of a bouquet of seven local private equity funds that the institution has in the pipeline for investments this year. See details of the other six below:

• Ambit Pragma II: The growth capital, small and medium enterprises-focused fund has a target corpus of $150 million. IFC has committed an investment of $20 million.
• Zephyr Peacock India Fund III: Raising a $150 million corpus to invest in small and medium enterprises. IFC has committed $15 million.
• Climate change-focused funds: Plans to make undisclosed commitments to two unnamed climate change-focused funds. Further details were not disclosed.
• Generalist fund: Will make an undisclosed commitment to a generalist fund later this year, for which further details were not disclosed.
• IKMC: IFC has committed up to $15 million in India Knowledge Manufacturing Company (IKMC), which has a target corpus of $150 million. The fund will focus on sectors such as healthcare, information technology and cleantech. IKMC will invest through Forum Synergies India Trust, a SEBI-registered venture capital fund, which in turn is managed by Forum Synergies (India) PE Fund Managers.

Overall, the institution expects to invest $100 million as a limited partner this year, apart from other direct investments, said Ayaan Adam, head of financial institutions and private equity and manager financial markets for South Asia. Earlier, it also made a $20 million commitment to bottom-of-the-pyramid focused venture capital fund Aavishkaar’s $120 million second fund.

Image Courtesy: IFC