The International Finance Corporation has invested $60 million in Motilal Oswal Alternates’s fifth fund in a deal that will allow it to co-invest in the Indian private equity firm’s portfolio companies.
This is the World Bank Group company’s third and largest equity investment in an MO Alternates fund.
The India Business Excellence Fund V G managed by MO Alternates focuses on mid-market companies in the consumer, financial services, life sciences, and manufacturing sectors. IFC’s investment in it comes attached with a $60 million co-investment envelope that will allow it to invest in companies alongside MO Alternates’s latest fund.
Equity co-investment enables banks like IFC to invest in future investments made by a venture capital or private equity firm without paying high fees.
“IFC’s investment aims to leverage private capital and solutions to boost job creation, promote inclusive and sustainable growth, and support India’s transition to a higher middle-income country,” said Mohamed Gouled, IFC’s vice president of industries, in a statement.
The India Business Excellence Fund V G fund has a target corpus of $750 million, with a greenshoe option for an additional $150 million.
Over the course of the fund’s lifecycle, MO Alternates plans to invest in 12-16 mid-market companies. It will target companies working not just in India’s big cities but also in low-income states as well as tier-2 and tier-3 cities.
“IFC’s investment in the fund sends a powerful signal to other investors, especially institutional investors, to invest in India,” said Vishal Tulsyan, managing director and chief executive officer of MO Alternates, in a statement. He added that the investment would act as encouragement to local fund managers to raise funds for investments in India’s underserved regions.
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MO Alternates’s journey
IFC had invested $25 million in MO Alternates’s second fund, which had a corpus of $115 million, and $35 million in its fourth fund (sized at $550 million).
Among the PE firm’s notable investments are consumer lending startup Kreditbee, which was last valued at $700 million; non-banking financial company SK Finance, in which MO Alternates invested ₹415 crore for a minority stake; and health insurance company Niva Bupa Insurance.
In 2021, MO Alternates sold its entire stake of about 5% in India Energy Exchange for ₹325 crore, according to VCCircle. Its other notable investment exits include listed consumer firm Mrs. Bectors Food Specialties Ltd and electronic auto components manufacturer Uno Minda Ltd (formerly known as Minda Industries).
MO Alternates’s ₹500 crore first fund, from which it has exited, delivered an internal rate of return of 26.8%, according to the company’s website.
Investments from domestic private equity firms in Indian companies increased from 9% in 2012-2014 to 11% in 2022-2024, according to McKinsey & Co.
The consulting firm attributed this to three factors: increasing number of domestic general partners (who manage a fund), larger fund-raising and fund sizes, as well as interest from limited partners (which invest in PE and venture capital funds) in India-specific portfolios as they look to diversify their investments.
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