The Commonwealth Development Corporation (CDC), under its Commonwealth Private Investment Initiative (CPII) programme, has launched a fund which is aiming to raise $200 million for investment in South Asia. At its first closing in late Autumn, the South Asia Regional Fund, the third vehicle established under the CPII umbrella, had raised $119.5 million (ecu 107 million). Together with the CDC funds for the Pacific and Southern Africa regions (EVCJ April/May, page 14), the total raised so far under the CPII is $200 million.
The CDC contributed $50 million of its own funds to the first closing total. The balance was raised from institutions, mainly public sector bodies, in South Asia, including three Indian and four Pakistani institutions and institutions in Malaysia, Mauritius and elsewhere in the target region. Temasek, the Singaporean state investment body, is also an investor.
Marketing for the South Asia Regional Fund will now focus on private sector investors in the UK, the US, Hong Kong and Australia, according to Ramduur Singh of the CDC. Ultimately, therefore, the fund should comprise approximately one third CDC money, one third money from government-related institutions in its target region and one third private sector capital. A second closing is scheduled for March 1998.
The fund will invest in India, Pakistan, Sri Lanka, Bangladesh and the Maldives and will also cover the non-Commonwealth states Bhutan and Nepal. The vehicle is aiming to deliver a 20% IRR in dollar terms to its investors over its ten-year life.
Although the CDC’s underlying remit is to promote development, its funds which have raised private sector capital under the CPII will be run on purely commercial lines. The South Asia Regional Fund, incorporated in Mauritius, will be managed through the seven CDC offices in South Asia and will have an independent board. Ramduur Singh said that, while investment decisions would be based on commercial venture capital criteria, the fund will seek to invest in sectors likely to benefit overall economic development in the region, with export-led enterprises being a particular target for the fund. No specific country allocations have been set, and the geographic spread of the portfolio will be determined solely by deal flow.
The fund’s first closing came weeks after the announcement that the CDC, which no longer receives any government funding, is to be partially privatised. Though details have not yet been announced, the government is apparently planning to sell a substantial stake in the CDC, enabling the proceeds, expected to total around GBP500 million, to be reinvested in development programmes. The government is expected to retain a stake of around 40% in the CDC – its first privatisation candidate – while maintaining control through a Ogolden share arrangement.