Xponentia Capital Partners has raised Rs 365 crore ($45.7 million) as part of the maiden close of its second rupee-denominated fund, top executives at the mid-market private equity firm said.

Xponentia aims to raise Rs 750 crore for Xponentia Opportunities Fund II, which is almost double its first fund.
The first fund closed at Rs 351 crore in 2021, with another Rs 100 crore as a co-investment of limited partners.
Both are registered as Class II Alternative Investment Funds under Sebi.

The bulk of the funding for the second fund comes from Indian corporates, family offices and high-net-worth individuals.

Xponentia expects to complete the final closing of the second fund by the end of December. The second fund will invest around Rs 100 crore each in financial services, business services, healthcare and consumer sectors.

“Investors in XOF-1 (Xponentia Opportunities Fund-1) are very pleased with the fund’s performance,” said managing partner PR Srinivasan. “In addition to strong returns, investors realise that fund performance is driven by realised exits, not just based on valuation markup. In XOF-1, the allocation of paid-in capital or DPI is over 90%,” he added.

DPI refers to the percentage of capital returned to fund investors as a percentage of capital received from them. Xponentia returned more than 90% of its principal from its first fund due to a partial exit from Barbeque Nation and a complete exit from its investment in Spoton Logistics. In 2021, Delivery acquired Spoton Logistics for approximately $235 million.

Meanwhile, the first fund went on to invest in six companies: Flight Simulation Technology Centre, Barbeque Nation, Easy Home Finance, R4Rabbit, Medsource and Altigreen. It is also awaiting regulatory approval from the first fund for its last investment. Executives declined to name the investment.

“Timely exit allows us to reinvest and deploy 100% of the fund, thereby closing the gap between gross and net IRR (internal rate of return),” Srinivasan said.

The private-equity firm reports a net internal rate of return to its investors after deducting an annual management fee of 2% on funds raised. The firms seek to boost the fund’s net internal rate of return by not charging a management fee for redeployed capital obtained from exits.

“Domestic investors are grossly under-allocated to classic private equity and alternative asset classes, with family offices and institutions keen to invest behind managers with track records and outperformance. We are very confident that this will be possible and possible in the coming months. Exceeded XOF-2’s fundraising goals,” Singh added.

Xponentia was founded in 2018 by Srinivasan, Singh and Ajay Relan. Relan, who also founded private equity firm CX Partners, died in October 2021.