Samara sends a signal of confidence in a tight fundraising climate

The private equity firm plans to wind down its 11-year-old second fund over the next three months and will fully return the proceeds from its exits to its limited partners, said a person familiar with the matter, speaking on the condition of anonymity.

“The second fund has already exited nine out of 10 investments and expects to return the balance amount by September," the person cited above said, adding that the tenth exit will happen over the next month.

The fund has clocked a 3.5x gross multiple on invested capital, with a 25% internal rate of return, according to the person. Samara declined to comment.

Limited partners (LPs) or investors are increasingly looking at the track record of general partners, who manage these funds, before committing more money. That has prompted investment firms in India to consider cashing out some of their bets to return money to their LPs.

Quadria Capital returned its first fund of a similar vintage in 2023-end, Mint reported at the time.

Samara raised upwards of $300 million in 2014 for its second fund, but the total amount was higher because of co-investments by LPs. “Samara didn't lose money on any of the investments and the continuation fund has further enabled them to get quicker exits," the person quoted earlier added.

A continuation fund allows managers to hold on to investments for longer by transferring assets from a fund nearing closure.

Some of Samara's prominent exits from the second fund include the sale of Spoton Logistics to Delhivery; stake sale in AIG Hospital to Quadria Capital; sale of Lotus Surgicals to Tube Investments and Premji Invest; sale of stake in Oaknet Healthcare toEris Lifesciences.

It also offloaded stakes in medical devices firm Sahajanand Medical Technologies (SMT) Ltd, staffing firm First Meridian Business Services Pvt. Ltd and biryani restaurant Paradise Food Court Pvt. Ltd through a $150 million continuation fund led by TR Capital in 2023.

“Funds of the 2014 vintage have, in many cases, traversed complex economic cycles and regulatory landscapes," said Ketan Mukhija, a senior partner at Burgeon Law, said. “Those that have successfully returned capital demonstrate effective governance, strategic exits, and a commitment to investor alignment—hallmarks of well-managed alternative investment vehicles."

To date, Samara has deployed about ₹10,000 crore across all its funds. The India-focused private equity firm typically invests in mid-market companies poised for growth, focusing on consumer/retail, healthcare/pharma, financial services, and business services/technology sectors. Across the three funds, the firm has made over 25 acquisitions for its portfolio companies, including roll-ups.

A roll-up involves acquiring and merging smaller companies in the same sector to create a larger consolidated entity. Bain Capital and Carlyle, too, have used this strategy to consolidate their acquisitions in auto components and pharmaceuticals.

Over the years, Samara has seen its average ticket size increase from ₹300-700 crore, including co-investments in the second fund, to ₹500-1500 crore in the third fund. The company is currently deploying from its third fund, which has a target size of ₹2,000 crore with an additional green shoe option of ₹3,000 crore, according to a Crisil report published in July last year. The credit rating agency assigned Fund Management Grading – 1 to Samara Alternate Investment Fund III India. On a 1-5 scale, it describes 1 as 'very strong'.

Crisil said Samara's offshore funds have delivered a mixed bag, with the first fund generating weak performance despite an extension of four-and-a-half years. The investment firm's first AIF registered with Sebi has drawn down approximately one-third of its total commitments and has performed better than most of its peers in terms of distribution to paid-in capital (cash returned to limited partners) as of September 2023, the credit rating firm said.