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| Avigo PE Investments Ltd. |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 27524 |
| Company name | Avigo PE Investments Ltd. |
| Country | India |
| Sector | Collective Investment Vehicles |
| Environmental category | FI |
| Department | Private Equity and Investment Funds |
| Status | Pend PDS-IR |
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| Date SPI disclosed | September 25, 2008 |
| Projected board date | October 30, 2008 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| Avigo SME Fund III (the “Fund” or “Avigo III”), seeks to raise up to $300 million for investments in the high growth Small and Medium Enterprises in India. The eight-year closed-end private equity fund is a follow-on fund of Avigo SME Fund II (“Avigo II”), a $125 million fund in which IFC committed $10 million (Project No. 25638). The Fund will be managed by Avigo Capital Manager (the Manager), who has managed predecessor funds, Avigo SME Fund I & II. |
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| Project sponsor and major shareholders of project company |
| Avigo Capital Partners is an independent private equity group created in 2004 by Mr. Achal Ghai, a veteran in private equity and investment banking from multi-nationals such as ICICI, American Express, HSBC & CIBC World Markets, to build a network and invest in Indian SMEs. All the investors in Fund I were Mr. Ghai’s personal contacts. Fund III senior members of the team have worked together in Fund II. The two General Partners of the Avigo team have worked together for the last 4.5 years in building the firm and managing the Avigo SME Fund I and II. The team has continued to grow rapidly to meet the anticipated demands of Avigo III, increasing from seven in 2006 to the current 15 professionals who together bring decades of experience in private equity, investment and corporate banking, industrial and engineering management, operations, and marketing. |
| Total project cost and amount and nature of IFC's investment |
| The Fund has a target size of $300 million and it is proposed that IFC invests up to $25 - $30 million. |
| Location of project and description of site |
| The Fund is a public company incorporated under the laws of Mauritius. The Investment Manager, incorporated in Mauritius, will engage an Indian Advisory Company, incorporated in India, to provide advisory services for the investments to be made in India. The Fund will make investments in SMEs across India, primarily focused on the Industrial segment. |
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| Anticipated development impact of the project |
Supporting Small and Medium Enterprises. Strengthening SMEs is an integral part of IFC’s strategic priorities. By supporting the Fund IFC will increase access to finance to SMEs in India.
Sustainability through value addition. The Manager has a track record of actively hand holding its portfolio companies in Avigo II, demonstrated by revenue and net profit growth of 52% and 88% respectively in FY2007. The Manager will retain this value adding investment philosophy in Avigo III, leading to more sustainable SMEs.
Impact in Tier II and Tier III cities. The project will deepen IFC’s footprint in IDA countries by investing primarily in India, and in SMEs through focusing on smaller (Tier II and Tier III) cities, where the majority of the populace resides. The existing funds have invested in companies which have an impact across India, including in lagging states. For example Tecpro Systems has a factory in Rajasthan, GET Power has projects in Meghalaya and Orissa, and Bharat Box has factories in Jammu & Kashmir. This rationale is consistent with IFC’s India equity strategy which is to increase capital flow into overlooked market segments and cities. |
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| IFC's expected development contribution |
Catalytic effect. The Manager’s goal is to raise 75% of the Fund from private investors and IFC’s presence is important to realizing this goal. As a lead investor in Avigo II, the Manager’s first third-party fund, IFC’s continued support and early commitment to Avigo III will be an important signal to prospective investors.
Fund structuring. IFC played a significant role in the structuring of Avigo II due to the complex tax legislation and onshore/offshore requirements of investing in India, and has requested IFC’s support in structuring Avigo III. IFC will also embed best practice standards associated with successful private equity funds.
Co-investments. As the Manager targets larger SMEs and portfolio clients grow, these companies will reach a size suitable for direct IFC financing.
Environmental and Social standards. IFC is better placed to provide advice on environmental and social standards than other investors from its experience in the area. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.
During appraisal, IFC analyzed the fund’s expected portfolio and sectors of investment and determined the Applicable Performance Requirements based on an analysis of the potential social and environmental risks associated with the expected portfolio. The Applicable Performance Requirements are:
- The IFC FI Exclusion List
- The applicable National Social and Environmental Laws and regulations
- The IFC Performance Standards
As an existing IFC client (Avigo Fund II, # 25638) the fund manager has developed and is implementing a satisfactory Social & Environmental Management System (SEMS) and has sufficient capacity to implement the same.
Based on the Applicable Performance Requirements and fund SEMS and capacity review, the project will be required to:
- Apply the Fund Manager’s SEMS to ensure that S&E risks associated with investments under #27524 are
appropriately managed
- Identify responsible, qualified persons to manage and implement the SEMS
- Commit to implement the SEMS to ensure that its investments/activities are in compliance with the Applicable Performance Requirements
- Submit a periodic report to IFC as per a format to be provided by IFC |
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| For inquiries about the project, contact: |
Mr. Achal Ghai
Managing General Partner
Avigo Capital Partners Pvt. Ltd.
404-407, Mercantile House,
15, Kasturba Gandhi Marg,
New Delhi-1, India
Telephone: +91-11-41531230;
Fax: + 91-11-41531235
Website: www.avigocorp.com |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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