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“The assets include Vastu Housing Finance, APAC Financial Services Pvt Ltd and Quantiphi,” one of the people cited above said. “The fund is expected to roll out in the coming month and the firm wants to continue backing some of these assets,” the person added.

Mint first reported on Multiples exploring a continuity vehicle in May last year. 

Also Read: Why continuation funds are the new favourites in investor arsenals

The development comes as investors look to stay invested in successful portfolio companies even as their fund cycle nears an end to allow their backers, also called limited partners, an exit route. Such sophisticated vehicles have been on the rise among venture capital and private equity firms amid a broader liquidity crunch.

Multiples, Vastu, APAC and Quantiphi did not immediately respond to requests for comment.

The private equity firm invested in Vastu in 2016, in APAC Financial Services in 2018 and in Quantiphi in 2019. Multiples had invested in these companies from Fund 2, which was raised in 2015 and had a corpus size of $550 million. 

With close to $3 billion under management, the private equity firm invests in sectors like financial services, pharma and healthcare, consumer tech, and enterprise technology. 

In 2023, it announced its first close of its fourth fund at $640 million. It has also clocked notable exits in companies, including Dream11, Livpure, Delhivery, PVR Cinemas and RBL Bank.

Besides Multiples, India Quotient, Kae Capital, Westbridge Capital and Lightbox are exploring similar structures, Mint reported earlier. 

In July, Lightbox confirmed that it is considering a $100 million continuity vehicle to continue backing Rebel Foods, Zeno Health, PayMate and Furlenco, among others.

Also Read: VC firm Lightbox considers $100-million continuation fund to back mature startups

While this is more common in overseas markets, India is also seeing an uptick in continuity funds as investors look at exits.

In April, private equity firm ChrysCapital closed its largest ever continuation fund at $700 million, anchored by investors including HarbourVest Partners, LGT Capital Partners, and Pantheon Ventures. Samara Capital also raised a $150 million continuation fund in 2023 while Blume, an early-stage venture capital firm, raised a 200 crore fund.

Globally, notable examples include early-stage investment firm Antler’s $285-million fund, Investcorp’s $185-million fund, New York-based Hildred Capital Management’s $750-million fund, and Carlyle’s $2.2-billion fund.

While the primary exit avenue has proven to be an initial public offering, experts and industry executives expect that exits in India will be a mix of mergers and acquisitions and secondary transactions, which include continuation vehicles, going forward.

Also Read: Small investments surge as new wave of angel investors enters startup scene, seeking lucrative returns

Broadly, continuation funds provide an exit for limited partners while allowing investment firms to remain invested in high-performing portfolio companies. These funds support trophy assets that need more time to reach their full potential beyond the typical fund cycle.

Since a fund lifespan cannot be in perpetuity, as instructed by regulators, continuation funds offer an effective exit route for limited partners, giving them a level of certainty on the returns they will get.

They also eliminate the early risk factor for new investors, as they will know the assets they will be backing, as opposed to a traditional fund where a venture capital or a private equity firm, known as general partners, scout for new opportunities.

Global investors like Pantheon and HarbourVest have expressed interest in ramping up their investments in the country. As LPs become more confident about exit routes in India, strategies like a continuation vehicle are coming of age.

“This approach provides general partners with the flexibility to continue managing and growing these assets, while also offering liquidity to limited partners who wish to exit,” said Siddharth Mody, partner at JSA Advocates. He added that this could benefit investors by avoiding premature exit to maximize value creation.

Mody said this could also allow general partners to time exits based on favourable market conditions instead of being bound by conventional fund expiration deadlines that typically have an 8-10-year tenure.

Broadly, investors have noted that India’s private equity and venture capital ecosystem has matured significantly and as a result, the adoption of continuation funds has gained momentum.

Mody attributed this to a host of factors, including a need for liquidity, a rise in secondary transactions and policy frameworks that support the transfer of unliquidated assets from expiring schemes to new schemes. 

“In the future, continuation funds are poised to see increased adoption to optimize returns and adapt to evolving market conditions,” he concluded.   



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