Foundation PE looks to ramp up India bets as secondary market gains momentum

Jason Sambanju, partner, CEO and founder, said: “India has been our most important market for our Asia strategy and we have closed half of the eight deals from our first fund in the country. The region is emerging as one of the most interesting secondary markets driven by a favorable regulatory environment and we think there are many of the right conditions for this market to really thrive.” Mint in an interview.

Foundation, a pan-Asian secondary firm, is also expanding its local presence and brought on board Dinesh Tiwari as a venture partner earlier this month.

“From a team perspective, we currently have three people in India and we will expand that selectively. The idea is to really capture the first wave of opportunities in the country, and given the limited competition in the specific area in which we operate, it has become a very attractive market for us to focus on,” said Alok Gupta, partner and head of India, adding that he expects a significant increase in investments.

liquidity pressure

The firm’s increased focus on India comes as more global and domestic players move to capitalize on the country’s expanding secondary opportunity, driven by funds nearing the end of their life cycles and seeking liquidity to return capital to investors.

Private equity and venture funds have tripled in the last decade, with investors allocating $78 billion into India-focused PE/VC funds since 2020, according to Morgan Stanley’s November report. The country now ranks third globally in the number of venture-backed private unicorns, behind the US and China, the report said.

By 2024, India will account for 20% of all private equity and venture capital investments in Asia, the firm said.

In 2024, Oister Group and Tribe Capital Management launched a $500 million secondary fund focused on India, while Piyush Gupta, former managing director of venture capital firm Peak XV Partners, founded Kenro Capital to target late-stage secondary deals without disclosing the fund size. Neo Asset Management introduced a secondary strategy and 360 One Asset Management also introduced a strategy. ₹5,000 crore secondary fund.

Global players such as TR Capital and TPG NewQuest are also operating in India’s secondary market.

This is also due to the broader private equity market operating strongly in India. “The secondary market is a function of the primary fundraising market. This has increased with many investment firms in the country being in fundraising mode, which has provided us with more opportunities in parallel,” Sambanju said. he explained.

“We also decided to consider India as one of the key geographies as a large number of venture capital and private equity players are looking for liquidity,” Gupta added.

Founded in 2017, the Singapore-based, middle-market-focused firm typically partners with general partners (GPs) and limited partners (LPs) to structure liquidity solutions at various stages of a fund’s lifecycle. Its first fund, with final closing in 2022, made eight investments in India (four), China (three) and Australia (one) but did not disclose transaction details.

Although the firm is over-indexed in India, it operates only GP-led and LP-led secondary transactions in the country. In a GP-led secondary transaction, a fund manager does not necessarily need to consider exiting an asset but rather creating liquidity from a portfolio company to return capital to LPs while continuing to manage the asset.

“We specialize in this area where we focus on working with GPs to help them identify opportunities to create liquidity, where limited partners can take their returns and perhaps even use the capital to reinvest into the GP’s next fund,” Sambanju said.

The fund has completed two single-asset follow-on funds in India but did not disclose details. Typically, a continuation fund allows investors to hold on to successful portfolio companies or trophy assets that need time beyond the fund’s life cycle to reach their full potential, while offering liquidity to those seeking an exit.

India is also starting to see multi-asset follow-on vehicles. Last year, Multiples, Vastu Housing Finance Corp. Ltd announced a $430 million follow-on vehicle to expand its investments in Quantiphi Analytics Solutions Pvt. Ltd and APAC Financial Services Pvt. Ltd. The vehicle was backed by HarbourVest Partners, Hamilton Lane, LGT Capital Partners and TPG NewQuest.

In 2024, ChrysCapital announced a $700 million follow-on vehicle backed by HarbourVest Partners LLC, LGT Capital Partners Ltd, Pantheon Ventures (UK) LLP and other investors. Private equity firm Kedaara Capital is also in the market to launch a $300-400 million follow-on vehicle. Mint It was previously reported.

The other category the trust focuses on is LP-led secondaries, in which a limited partner sells its position in the fund to another investor.

“In India, this market is still in its infancy and for it to really develop, we need scale in terms of the size of the LP position and the willingness of these large entities to sell at market values. This is still evolving in India.” said Sambanju.

The firm acquired all LP shares in early-stage venture capital firm Prime Venture Partners’ first fund in 2022, according to online reports.

Sambanju added that the majority of existing LPs are traditional utilities that are often reluctant to accept discounts associated with secondary transactions. “Therefore, there is an opportunity cost here. I think the decision to divest such investments is still at a developing stage in the country.”