According to sources familiar with the matter, IL&FS Investment Managers Ltd (IIML), which is the country’s largest home-grown private equity firm when evaluated by assets under management (AUM), is developing a new realty fund. The publicly listed PE fund manager, with $3.2 billion AUM, will reportedly launch the IL&FS India Realty Fund (IRF) III. This fund aims for a targeted corpus of $500 million within the current financial year.
The targeted size of the new fund is substantially smaller than its predecessor, IRF II, which accumulated a substantial $895 million. Launched in 2007 with an initial target corpus of $750 million, IRF II surpassed expectations during the market's peak. This second fund has demonstrated strong performance, achieving gross returns of 19.9 percent per annum across two divestments.
A wealth manager familiar with the planning stated, "The Company has decided to raise a smaller fund as managing a large fund has become tough since its average deal size is of $20-30 million."
Sources indicate that the company's management has communicated to its investors that the fund requirement in Indian realty is not as large as its peers in other countries. As such, the PE firm prefers to concentrate on smaller-sized deals.
An e-mail sent asking for comments from the IIML spokesperson went unanswered.
On Monday, IML scrip experienced a 1 per cent decline, settling at Rs 27.15 on the BSE amidst a strong Mumbai market.
The firm's first realty fund, IRF I, was raised in 2006 with a corpus of $525 million, which saw complete investment. The second fund facilitated investments in over 30 projects nationwide. Looking ahead, the company intends to maintain investments within the same deal size bracket (up to $30 million) utilizing its next fund.
According to its official website, IIML currently manages six real estate funds with a combined $2 billion under management. In addition to its dedicated funds, it also manages several joint venture real estate funds, including IL&FS Milestone Funds I and II, in collaboration with Milestone Capital.