India will benefit from China funding slowdown but US, Japan to gain more, says Manish Kejriwal 

Manish Kejriwal, Founder and Managing Partner, Kedaara Capital, and Karan Bhagat, founder, managing director and CEO, 360 ONE Asset, at the IVCA Conclave in Mumbai.

India stands to benefit from a funding slowdown in China but it would not be the biggest beneficiary, Manish Kejriwal, founder and managing partner, Kedaara Capital, has said.

“The money will probably, from a risk adjusted perspective, go back to the United States. The two countries which will be seeing incremental flows would be Japan and India, in that order,” Kejriwal said at the IVCA Conclave in Mumbai on February 26.

This comes at a time when global private equity funding to China has slowed down on the back of a lacklustre market performance in recent years.

“The global flows of capital, which we're going to China, have stopped because there has not been any disbursements in China, barring a few funds that have taken a cross border approach in the country,” he said in conversation with Karan Bhagat, founder, managing director and CEO of 360 ONE.

Kejriwal said overseas funds would be the first to benefit rather than domestic funds.

“...The money going into KKR, and Blackstone, has remained constant. Given that they have to deploy the capital in three to five years, they will pivot away from China due to the context of the risks and that money will also come to India,” he added.

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Larger Pan-Asian funds will be dominant in the coming years with a higher level of dry-powder, he said.

Kedaara, which is in the market for its fourth fund worth $1-1.5 billion, advises and manages over $3.5 billion in assets across the consumer, financial services, pharma and healthcare, and technology sectors.

The firm has been received backing from global funds for all its four funds, Kejriwal said.

“For fund one, we had some very friendly families who helped start us off, and even then 95 percent of the money was global. And for the last two funds, it's been 100 percent global money. Similarly, the current fund that we are in the midst of raising, so far, is a complete 100 percent global money,” he said.

Domestic versus global funds

Kejriwal said domestic funds are sometimes not well understood by the retailer, the high net worth individuals and family offices, resulting in a misalignment of expectations. “There’s often mis-selling of the product,” he said.

360 One's Bhagat agreed and said matching of duration is critical, whether it's with insurance companies, pension funds or family offices.

“I wouldn't really say the challenge is with the client, the challenge is with us. So challenges are the execution, matching the expectations and selling process. And your challenge eventually, will be to kind of ensure that the right time period and the right details are matched,” Bhagat said.

He also added that despite the challenges there are a lot of benefits of local funds like lower depreciation between dollar and rupee and the ability to move fast.