Kedaara Capital eyes $200-300 million continuation fund

“Lots of funds, including Kedaara, are adopting this vehicle to get some interim liquidity and return capital to their investors,” said one of the people, all of whom spoke on the condition of anonymity.

“The two to three assets that will be rolled into the continuation fund are still being discussed with incoming investors,” said the second of the three people cited above.

The private equity (PE) firm did not immediately respond to Mint’s request for a comment.

If it goes as planned, Kedaara will join the likes of Multiples Alternate Asset Management Pvt. Ltd and ChrysCapital, which closed continuation vehicles over the last year.

ChrysCapital announced a $700 million continuation fund anchored by HarbourVest Partners LLC, LGT Capital Partners Ltd, Pantheon Ventures (UK) LLP, and other investors in 2024.

Multiples announced a $430 million continuation fund earlier this year to extend its investment in Vastu Housing Finance Corp. Ltd, Quantiphi Analytics Solutions Pvt. Ltd, and APAC Financial Services Pvt. Ltd.

A continuation fund helps investors hold on to successful portfolio companies, or trophy assets, that need more time to reach their full potential beyond the fund cycle. Since a fund life cannot be in perpetuity, as instructed by regulators, continuation funds offer an effective exit route for their backers, also called limited partners.

Such sophisticated vehicles have been on the rise among venture capital and PE firms amid a broader liquidity crunch.

Mumbai-based Kedaara currently has assets worth over $6 billion under management across sectors, including financial services, consumer, pharma and healthcare, and technology and business services.

Over the last few years, Kedaara has had successful exits across multiple portfolio companies such as Aavas Financiers Ltd, Ami Lifesciences Pvt. Ltd, AU Small Finance Bank Ltd, Bill Forge Pvt. Ltd, Mahindra Logistics Ltd, Manjushree Technopack Ltd, Parksons Packaging Ltd, Sunbeam Lightweighting Solutions Pvt. Ltd, Manyavar (Vedant Fashions Ltd), Vijaya Diagnostic Centre Ltd, and Vishal Mega Mart Ltd (part exit).

It could see further exits as multiple portfolio companies, such as Lenskart, Purplle (owned by Manash E-Commerce Pvt. Ltd) and Avanse Financial Services Ltd, are preparing for public listings.

The rising trend

In May 2024, Mint reported that among venture capital firms, IndiaQuotient, Kae Capital, Lightbox India Advisors, and WestBridge Capital Management were also considering similar moves.

Broadly, secondary transactions are gaining traction in India as several investors at the end of their fund’s life cycle are seeking liquidity and gearing up to exit companies they have been invested in for some time.

In June, Eight Roads Ventures sold part stakes in software-as-a-service (SaaS) platforms MoEngage India Pvt. Ltd and Whatfix Pvt. Ltd, and logistics firm Shadowfax Technologies Ltd to TR Capital Group in a $50-million secondary transaction.

In 2023, Samara Capital Group made a similar transaction when it sold its stakes in medical devices firm Sahajanand Medical Technologies Ltd, staffing firm First Meridian Business Services Pvt. Ltd, and biryani restaurant Paradise Food Court Pvt. Ltd to a TR Capital-led investor consortium in a $150 million secondary deal.

Prior to that, Samara Capital also rolled its stake in Sapphire Foods India Ltd (which operates KFC and Pizza Hut restaurants) into a new entity, where investors Creador, TPG NewQuest and TR Capital cumulatively put in ₹1,150 crore.

In 2024, Avendus Wealth Management Pvt. Ltd said secondary exits by early-round investors would continue to dominate private rounds, and the need for returns would remain strong. “Large private secondary deals and initial public offerings with substantial offer-for-sale components will persist,” the investment bank said, adding that there would be more structured processes for secondary exits with some combination of small primary investments.

The report further highlighted that 2024 has witnessed some good transactions via portfolio secondary offerings. “The secondary baskets and continuation vehicles of VC/PE portfolios will become even more mainstream, though sellers have to adjust to discounts in GP-led secondary processes.”

As investors look to disrupt this opportunity, India is also seeing a growing appetite for dedicated secondary funds. In 2024, Oister Group and Tribe Capital Management launched a $500 million India-focused secondary fund.

As the market steadily becomes a substantial source of funding, such partnerships are expected to capitalize on the growing demand for secondaries. Though India’s secondaries market is still at an early stage, globally, it is estimated to beover $130 billion, the companies estimated at the time of the fund launch last year.

Piyush Gupta, former managing director of venture capital firm Peak XV Partners, also launched Kenro Capital in 2024 to target late-stage secondary dealsbut didn’t disclose details about the fund’s size.