IDFC Alternatives

https://www.idfc.com/alternatives/infra-equity/our-mandate.ht

Funds managed

Fund nameAsset ClassLicense
India Infrastructure Fund India Infrastructure Fund 2Real Estate Yield FundInfrastructureInfrastructureReal estate- debtSEBI AIF Cat 2SEBI AIF Cat 2SEBI AIF Cat 2

About

IDFC Alternatives is one of India’s leading multi-asset class investment managers. IDFC Alternatives is IDFC’s alternative asset management vertical and manages over USD 3.4 billion on behalf of leading institutional investors from across the world. IDFC Alternatives Ltd (“IDFC Alternatives”) is a 100% subsidiary of IDFC and is an advisor and investment manager of IDFC sponsored funds across private equity, infrastructure and real estate. 

 IDFC Alternatives launched its first private equity fund in 2002, since then IDFC Alternatives has expanded its alternative asset portfolio to include a total of three private equity funds, two infrastructure equity funds and one domestic real estate fund. 

Key staff

Satish Mandhana – He is the managing partner and chief investment officer of IDFC Alternatives. He has over thirty years of experience in the areas of private equity, corporate finance, investment banking and business strategy. In his role as the Managing Partner & CIO, he is responsible for all investments made by the IDFC Alternatives platform and currently has direct responsibility for performance of investments under the private equity asset class.

He represents IDFC Alternatives Ltd. on the Board of Directors of VIOM Networks, Green Infra and GMR Energy. Before moving into his current role, he was the Managing Partner of IDFC Private Equity which he joined in 2006. Prior to joining IDFC Alternatives, he was the CFO & Head of Business Strategy at JK Paper (2003-2006). Preceding his work at JK Paper, he worked as Director of CDC Advisors (1996-2003). Prior to CDC, he worked with SRF Finance Ltd. (1992-1996 and part of GE Capital), SRF Ltd. (1985-1992) and Eicher Goodearth Ltd. (1982-1984) in their investment banking, business strategy and industrial engineering functions. He also had a short stint as an entrepreneur (1984-1985). He is a Management Graduate from the Faculty of Management Studies, Delhi University and holds a Bachelor’s degree in Industrial Engineering from Indian Institute of Technology, Roorkee.

Ritesh Vohra–  Ritesh Vohra is Partner and Head of Real Estate at IDFC Alternatives.He has over 18 years of experience in real estate investing and real estate development advisory. He joined IDFC Alternatives in late 2011. His primary focus is on building and managing the real estate funds management business at IDFC Alternatives. He is also responsible for overseeing the investment and asset management processes for the portfolio.

Prior to joining IDFC, he  worked as a managing director at real estate fund manager Saffron Advisors, which was later acquired by IL&FS. Preceding that, he worked with several advisory firms including Jones Lang LaSalle and also had an entrepreneurial stint.He completed his undergraduate studies in Hospitality Management from the Institute of Hotel Management, Catering and Nutrition, New Delhi and also holds a Masters in Business Administration from the Management Development Institute, Gurgaon.

Investment philosophy (for firm)

The firm  practices high standards of corporate governance and independent arms-length reporting structures to drive accountability and transparency in its operations. Ite invests alongside sponsors with good management teams, sound governance practices, strong financial resources and robust track record of execution.

Infrastructure

Firm focuses on the  assets that provide regular distributions and capital appreciation. The firm  seeks to achieve attractive risk-adjusted returns over the long term by investing in a diversified portfolio of infrastructure assets/companies in India.

To deliver long term and steady returns, it targets infrastructure assets, concessions and contracts which exhibit some or all of the following characteristics:

  • Underlying concessions, assets or contracts driving inflation adjusted cash flows to shareholders;
  • Predictable and sustained revenues with value appreciation over the long term;
  • Predictable maintenance and capital expenditure requirements;
  • Regulated essential services;
  • Reasonable entry barriers;
  • Monopolistic characteristics; and
  • Lower exposure to technology risk.

Real estate

The firm employs a range of strategies to pursue investment, development and acquisition opportunities across various property types with a focus on opportunities where there is market dislocation and improving fundamentals. It has deployed capital across office acquisition and residential debt strategies.

The firm looks at equity and debt investments across the various asset classes within Real Estate. It partners with high quality developers with an established track record.

Funds

Indian Infrastructure Fund

The infrastructure team of IDFC Alternatives has USD 1.8 billion under management comprising USD 927 million India Infrastructure Fund (“IIF”) which was closed in 2008, and India Infrastructure Fund II (“IIF 2”) with a fund size of about $900 Million which closed in 2014.

The fund  has a long-term investment horizon. The investment strategy targets assets that have visibility of strong, predictable cash flows in the form of regular dividend distribution, low volatility of returns and potential for capital growth.

Investment criteria

  • Core Infrastructure
  • Asset Focus
  • Valuation: Cash Flow Driven
  • Target IRR: Typically in high teens

Investment decisions are based on a critical evaluation of underlying assets to ensure cautious and robust entry valuations.

Target Sectors

IIF invests directly or indirectly in assets and companies that primarily derive their value from infrastructure concessions/projects/assets with principal exposure to the following target sectors which guides our core infrastructure focus:

  • Transport Infrastructure – roads and logistics
  • Energy and utilities
  • Urban and social

Portfolio companies

Road

Logistics

Energy and utilities

Electricity generation – Renewables

Electricity generation – Conventional

Gas distribution

Urban and social

Healthcare

IDFC Real Estate Yield Fund

In 2014, IDFC Alternatives announced the final close of the IDFC Real Estate Yield Fund – an INR 7.5 billion (US$ 125 million) domestic fund focused on the residential segment in India. The IDFC Real Estate Yield Fund focused on debt deals that generate high yields, while ensuring downside protection and adequate security cover.The fund has built a high-quality portfolio by focusing on established developers and brown field residential projects, which will help generate superior returns for the fund’s investors by employing a balanced risk-return strategy. The IDFC Real Estate Yield Fund is seeking medium-term high yield and structured debt opportunities against ongoing residential projects across tier I cities in India. A typical investment would be INR 0.5-1.2 billion (US$ 9-20 million) in size with a three to four year time horizon.

Portfolio companies

The fund has made investment in residential projects being developed by the following developers.

Media

IDFC Alternatives inks pact to sell infrastructure funds to GIP, VCCircle,30 April,2018

https://www.vccircle.com/e2808bmanipal-backed-e2808be2808be2808bigenetic-to-branch-out-into-b2c-mass-diagnostics-vertical

Multi-asset manager IDFC Alternatives Ltd sold its infrastructure asset management business to US-based private equity firm Global Infrastructure Partners (GIP). The infrastructure portfolio of IDFC Alternatives consists of two funds–the India Infrastructure Fund I and Fund II. The two funds have collectively invested about Rs 9,337 crore ($1.4 billion) in 32 infrastructure companies across roads, power, telecom tower and renewable energy sectors. The first fund invested in 17 companies and the second fund in 15, according to an IDFC investor presentation.The first fund has made 11 exits.The first fund had raised $927 million in 2009, while the second fund mobilised $900 million in 2014.

Investcorp to acquire IDFC Alternatives’ PE, real estate fund businesses,VcCircle,30 July 2019

https://www.vccircle.com/investcorp-acquires-idfc-alternatives-pe-realty-businesses/

Global alternative investment manager Investcorp acquired the private equity and real estate investment management businesses of IDFC Alternatives Ltd, a subsidiary of IDFC Ltd.

With the acquisition of IDFC Alternatives’ PE and realty business, Investcorp forayed into the alternative investment space in India. The deal provided Investcorp with immediate access to the large and growing private equity and real estate markets in India, together with a team of seasoned professionals. IDFC’s PE and realty fund businesses have assets under management of about $430 million.

The real estate business, led by Ritesh Vohra, also has two active funds. The funds provide structured senior credit within the residential real estate sector with a focus on projects in Mumbai, Bangalore, Hyderabad, Chennai and the National Capital Region. In the realty fund segment, it became one of the earliest fund managers to pursue a strategy to acquire complete control of ready-to-move office assets with the acquisition of the 1.3 million square feet Galaxy IT Park in December 2011 and the 1.5 million sq ft BlueRidge SEZ in March 2013 at a combined enterprise value of Rs 900 crore. It sold the assets in late 2014 at a gross internal rate of return of 22%, according to its website.

In 2014, IDFC Alternatives had announced the final close of the IDFC Real Estate Yield Fund, Rs 750-crore domestic fund focussed on the residential segment in India. Two years ago, IDFC Alternatives had raised Rs 760 crore under its IDFC Score Fund.   

Analyst questions

  1. Has there been any change in the investment strategy and process since the acquisition of infrastructure and real estate funds?
  2. What process does the firm follow to make investment decisions?
  3. What parameters are looked at for making a decision to exit from the projects?
  4. How much return has the funds provided to the investors since inception?
  5. What are common challenges and risks that real estate and infrastructure projects face in India?
  6. How does the firm mitigate and manage business, operational and regulatory risks?
  7. How is the performance measured and which benchmark is followed for comparison?

Prepared by – Punit Bansal, May 2021

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