**Samara Capital Set to Return Full Proceeds to Investors from Second Fund**
As Samara Capital prepares to finalize its third fund amidst a cautious investment climate, the private equity firm is on track to become one of the few in India to fully return capital to its investors with profits. Over the next three months, Samara plans to wind down its second fund, which has been active for 11 years, and return all proceeds from its exits to its limited partners, according to a source familiar with the situation who requested anonymity.
The second fund has successfully exited nine out of ten investments and anticipates returning the remaining amount by September, with the final exit expected within the next month. The fund has achieved a gross multiple of 3.5 times on invested capital, boasting an internal rate of return of 25%, as reported by the source. Samara Capital has chosen not to comment on these developments.
Limited partners are increasingly scrutinizing the track records of general partners managing these funds before committing additional capital. This trend has led investment firms in India to consider liquidating some of their investments to return funds to their LPs. For instance, Quadria Capital returned its first fund of a similar vintage at the end of 2023.
Samara raised over $300 million for its second fund in 2014, with the total amount being higher due to co-investments from LPs. The source noted that Samara did not incur losses on any of its investments, and the establishment of a continuation fund has facilitated quicker exits.
A continuation fund allows managers to retain investments longer by transferring assets from a fund nearing closure. Notable exits from Samara’s second fund include the sale of Spoton Logistics to Delhivery, a stake sale in AIG Hospital to Quadria Capital, and the sale of Lotus Surgicals to Tube Investments and Premji Invest. Additionally, stakes in Sahajanand Medical Technologies, First Meridian Business Services, and Paradise Food Court were offloaded through a $150 million continuation fund led by TR Capital in 2023.
Ketan Mukhija, a senior partner at Burgeon Law, commented on the resilience of funds from the 2014 vintage, stating that those that have successfully returned capital exemplify effective governance, strategic exits, and a commitment to investor alignment—key characteristics of well-managed alternative investment vehicles.
To date, Samara Capital has deployed approximately ₹10,000 crore across all its funds, focusing primarily on mid-market companies.
**FAQ**
*What is a continuation fund?*
A continuation fund allows private equity managers to extend the holding period of their investments by transferring assets from a fund that is nearing closure, enabling quicker exits and potentially better returns for investors.
