UK's CDC group finally manages to make low single-digit returns from India

Craig Gifford, portfolio director, intermediated equity, Asia, CDC
India has finally started delivering for the CDC group, a development financial institution (DFI) of the UK which has been in the country for three decades.

CDC first invested in VC firm Gujarat Venture Finance Ltd in 1991.

The returns are not significant, but in low single digits, driven by funds that were started after 2013, a senior executive of the firm told Business Standard on the sidelines of a conference in Delhi earlier this month.  

“The returns have been mixed. For a long time, India did not deliver returns in dollar terms. The earlier funds were hit by the financial crisis. The returns were not great in rupee terms,” said Craig Gifford, portfolio director, intermediated equity, Asia, CDC group.

Since then, there has been a lot of learning. The sophistication, track record and experience you see now was not there before 2008, said Gifford. “We are now moving to positive territory in dollar terms. It happened recently. It took a while to get there. The returns are in low single digits, which are not significant,” he said. Funds after 2013-14 have performed better, not just due to the funds cycle, but better capabilities. 

CDC deployed over $20 billion in India across 60 PE funds, some of which have been wound up. It typically deploys 30-35 per cent of its capital in India. Besides backing funds, it started investing directly in India from 2012 — both in equity as well as debt.  

In the last few years, CDC invested in companies which impact lives in central and eastern India. Some of these companies are headquartered in Delhi or Mumbai, but have production facilities or offer services in the central or eastern regions. 

It also has a pool of capital focused on bringing catalytic change – deals or projects that are more risky but can have a huge impact. In terms of sectors, CDC is focusing on infrastructure, affordable housing, education, healthcare, and manufacturing in India. In terms of regions, China has delivered the best returns for CDC, followed by Southeast Asia and Latin America. CDC ceased committing fresh capital to China after 2008 as the country moved up on per capita.

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