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Kotak pipes into mid-cap India

Kotak Mahindra, one of India’s largest financial groups, is launching a fund in the first quarter of this year that offers global institutional investors the possibility of receiving returns above the domestic stock market in a private equity-type offering.

Is it a Pipe (private investment in public equity)? The fund, called the Kotak India Focus Fund, will invest in listed mid-market Indian companies. The 20 or so stocks will be selected by portfolio manager Prakash Ramaseshan, who recently joined the group from a Middle Eastern family office. "There are numerous private equity funds in India chasing similar deals, and valuations appear rich," says Ravilochan Pola, CEO at Kotak Mahindra Inc, the New York-based subsidiary of Kotak Mahindra. "At the same time there are around 4,500 companies listed in the mid- and small-cap space in India that could benefit from a private equity-type treatment."

Is it an activist fund? The fund proposes to elect a board that would advise the portfolio’s underlying firms in order to add financial and strategic value. The stocks of the underlying firms would be sold when fair value was reached and returns handed back to the investors net of fees.

Is it private equity? The fund itself, however, has a lock-up period of four years, and an optional one year extra, when investors will be returned their initial money plus the performance of any remaining stocks in the portfolio, less fees.

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