Kotak PE to tap domestic investors for new lifesciences fund

The firm that has so far raised capital only from global investors is again looking at raising a lifesciences fund, this time from local investors.

“We are looking at tapping domestic investors for our new fund. We have already sought Sebi approval for the same and will launch it soon," said Srini Sriniwasan, managing director, Kotak Alternate Asset Managers Ltd. 

To be sure, the firm had raised a performing credit fund locally in the past. However, this is their first equity fund that is being raised domestically.

According to him, most large domestic institutional investors such as insurance companies and pension funds have not even exhausted the regulatory maximum permissible limits. The maximum permissible allocations across such institutions, based on 2023 data, is ₹7 trillion, of which only ₹3.2 trillion is invested. “Slowly, they (DIIs) are warming up to the idea of investing in AIFs and PE/VC funds. Our own capital should go towards building world-class companies out of India," Sriniwasan said.

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With more than $18 billion of assets under management across private equity, real estate, private credit, strategic situations, data centre and infrastructure, among others, the Kotak Mahindra Group realigned its alternative investment business under one umbrella last year.

For a company that has been in the alternative investment business for 20 years now, this is significant. As much as it is a sign of a maturing ecosystem, it also indicates how franchises now see the domestic pools of capital as a steady source of funds.

“We have very high conviction on two things that are likely to happen. First, we have already acted upon that, which is on the lifesciences space. Apart from investing through various other funds into bigger companies, we have been curating on our balance sheet a portfolio of early-stage lifesciences innovation companies," Sriniwasan said. 

Portfolio

The firm already has a portfolio of 19 early-stage companies and has already invested around ₹150 crore from its own balance sheet into these companies. “On the back of this, some of these companies have raised additional rounds of capital from the likes of Khosla Ventures, Accel Partners, Morgan Stanley etc," he added.

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This would be the Kotak Group’s re-entry into the lifesciences space, having earlier raised dedicated funds in 2008 and 2016 of $107 million.

According to Sriniwasan, Kotak's private equity is probably the largest healthcare investor in the country, having invested around ₹3,000 crore across various funds in the sector in the past 12 months alone.

Kotak Alternate Assets has so far raised $9.7 billion funds, including $1.6 billion in Strategic Situations Fund II, which is so far 40% deployed. So far, Kotak Alternate Assets has returned more than $3.5 billion capital across its various funds. “We have returned nearly all of the $1 billion capital from our Strategic Situations Fund I. The DPI is 97% and we still have a large part of the portfolio that we will monetize going forward. That would comfortably generate around 20% internal rate of return (in rupee terms)," Sriniwasan added.

The firm is also deliberating on launching an infrastructure/real estate fund that will look to invest purely in yield-generating assets, Sriniwasan said. “We are debating whether it should be infrastructure or real estate. That's something that we will decide over the next 12-18 months," he said.

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