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Darby Overseas is the private equity arm of Franklin Templeton Investments. It focuses on emerging markets and has a presence in Asia, Central and Eastern Europe and in Latin America.
Darby Asia worked with Franklin Templeton to raise the commitments for the new fund, which is named Franklin Templeton Private Equity Strategy. FTPES is a closed-end, rupee-denominated private equity portfolio which will invest in high-growth, mid-sized unlisted companies in India. The fund will focus on companies that are active in areas such as infrastructure, manufacturing, consumer goods and related sectors. It is managed by Franklin Templeton (India), while Darby Asia Investors (India) is the investment adviser to FTPES.
The fund is unique in that it was raised from high-net-worth individuals resident in India, via a retail platform. Franklin Templeton realised earlier this year that volatile and bearish equity markets were causing IndiaÆs rich to question their asset allocation strategies and that they would welcome an opportunity to buy into a private equity fund. Some specialists remark that this was a good strategy, as was the decision to use the Franklin Templeton marketing channels in India, much as the asset manager would have for a traditional mutual fund product.
Darby Overseas has made three investments in India in the past 12 months.
In April it invested $25 million in Bangalore-based Amalgamated Bean Coffee Trading (popularly known as Coffee Day). Coffee Day is an integrated coffee player, with operations ranging from procurement and processing to retailing. It owns and operates cafTs under the brand CafT Coffee Day and the fundraising was intended to help expand the network of cafes across India and even to Europe.
The investment was made by the $300 million Darby Asia Mezzanine Fund II, which closed in October 2007, having raised money from investors including China Investment and Finance (a subsidiary of China CITIC Bank), Mizuho Corporate Bank, Franklin Templeton Investments, the Asian Development Bank and two funds managed by AXA Private Equity.
Coffee Day follows a Rs700 million ($13 million) investment into Bangalore-based Bhoruka Power Corp in January. Bhoruka Power is a developer of small hydroelectric and wind energy power generation projects with a portfolio of 14 projects adding up to 91MW of capacity.
And in March 2007 Darby Overseas invested Rs750 million in North India-based Escorts Construction Equipment, a material handling equipment manufacturer that was a wholly owned subsidiary of Indian engineering conglomerate Escorts.
The Darby team responsible for FTPES is led by Deepa Sankaran, who joined Darby in 2006 from IL&FS Investment Managers. Sankaran is based in Mumbai and is responsible for investments in India.
The private equity fund raised in India builds on a strategy Darby has adopted this year of tapping local investors in emerging markets. In September the firm closed its Brazil Mezzanine Infrastructure Fund with commitments of $236 million from leading domestic institutional investors.
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