42204 - PC CAPITAL DEVELOPMENT II, LP

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Summary of Investment Information

Project Number

42204

Company Name

PC CAPITAL DEVELOPMENT II, LP

Date SPI Disclosed

May 8, 2019

Country

Mexico

Region

Latin America and the Caribbean

Projected Board Date

Jun 28, 2019

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Dec 21, 2023

Department

Equity Portfolio Management

Industry

Funds

Previous Events

Approved : Jun 28, 2019
Signed : Jul 1, 2019
Invested : Aug 18, 2020

Sector

Growth Equity Fund

Project Description

The project entails an IFC equity commitment of up to US$20 million, not to exceed 20% of total commitments, in PC Capital Development Fund II, L.P. (“The Fund”), a 10-year closed-end generalist fund raising $100 million to make growth equity and buyout investments in 6-8 Small and Medium Enterprises (“SMEs”) located in Mexico.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	20.0

Development Impact

Project Outcomes Stakeholders - Improved Access to Capital for SMEs in the Mexican PE market: The Fund will provide access to growth capital with an average ticket size of US$5 to 10 million in 6 to 8 Mexico SMEs, with total commitments expected to be up to US$20 million including follow-on investments for platform building and M&A. Stakeholders - Increased Investee Growth: The Fund is expected to add value to its investee companies by employing similar value creation strategies as Fund I through four key value-add approaches; (i) DD and Structuring; (ii) Operation; (iii) Governance; and (iv) Financial optimization. Contribution to Market Creation Competitiveness: The project is expected to strengthen the SME segment of the PE market by demonstrating proof of concept of this business model and contributing to attract further funding into the underserved SME PE space. This is expected to result in the crowding in of new funds in the SME segment of the markets, which could occur via emerging new fund managers or existing fund managers targeting this segment.

IFC own account equity: IFC will add value to the Fund through US$20 million of Own Account Equity from an institutional investor in a relatively young fund manager, in a market where investor risk perception is considered high based on political and trade uncertainties. In addition, investment from a lifecycle investor like IFC will position the Fund to have better access to co-investment capital for its investee companies. Non-Commercial Risk Mitigation: IFC's commitment in this Fund Manager is expected to send a strong signal of confidence to other institutional investors which have not traditionally targeted funds operating in the SME space in Mexico, at a time when the market is experiencing relatively subdued GDP growth rates over the medium term, coupled with underperformance from SME funds. Standard Setting: This is the first time IFC will be investing in the general partner. As a result, PC Capital will update its current Environmental and Social Management System (ESMS) to align with IFC's industry-leading E&S policy across the Fund and its investees.

E&S Category Rationale / Risks and Mitigation

The Fund will invest in a diversified portfolio of growth equity and buyout investments in Mexican small and medium-sized enterprises. The Fund will seek to deploy capital across its target markets and in sectors including retail and tourism, consumer goods, financial services, and health and life insurance. The Environmental and Social (E&S) risks are considered medium and mainly entail limited adverse E&S risk and impacts that are few in number, generally site-specific, largely reversible and readily addressed though appropriate mitigation measures. Therefore, this project has been classified as Category FI-2 according to IFC’s Environmental and Social Review Procedure. The Fund is not expected to invest in activities of high E&S risks. Coal-related activities are not eligible under this project. The Fund Manager will be required to assess and monitor all investments against the IFC Exclusion List, Applicable national laws and regulations and the IFC Performance Standards.

In accordance with IFC's Access to Information Policy, IFC will periodically disclose the names, locations and sectors of sub-projects that have been supported by IFC investments through private equity funds, subject to regulatory constraints and market sensitivities. The sub-project(s) listed below reflect(s) the status of the portfolio as of January 1, 2025.

Investee	Country Of Investment	Sector
IKE	Mexico	R-AC- Other Services (Including IT Enabled Services)
Medios Cattri	Mexico	X-XY- Other
Netwey	Mexico	R-BA- Computer Systems Design and Related Services (System Integration, Custom Computer Programming, IT Services etc.)
Polar - Toluca	Mexico	S-AA- Hospitals and Clinics

Potential environmental and social risks and impacts derive from the Fund´s capacity to identify and manage the environmental and social risks associated with investment activities. These are principally related to the (i) environmental risks such as air emissions, waste management, hazardous materials, as well as occupational health and safety of employees; (ii) employment practices as described in PS2; (iii) implementation of internal and external grievance mechanisms; (iii) supply chains E&S risks for consumer driven sectors; (iv) responsible E&S management practices and; (v) community issues such as life, fire and security of premises and emergency preparedness. As part of IFC’s investment, PC Capital will develop formal E&S policies and a supporting ESMS consistent with IFC’s Performance Standards. Responsibility for E&S policy shall lie with a Managing Director and will be integrated into the Fund’s investment cycle. As part of IFC’s investment, the Fund will develop and implement an Environmental and Social Management System which shall require the Fund to (i) review all investee companies per the E&S laws and regulations of the target country and the IFC Performance Standards.; (ii) Conduct an E&S due diligence (ESDD) to identify the applicable E&S risks of each investee company and require corrective actions as needed; (iii) implement a monitoring framework (and improve, where necessary) to supervise the E&S risks of all investee companies and report to IFC; (iv) whilst no Category A investments are expected, if any occur IFC will review their ESDD prior to the Fund’s investment, in addition to the first three ESDDs conducted for any sub-project of the Fund. Thereafter copies of all ESDD’s will be provided to IFC.

S.no	Title	Anticipated Completion Date	Status
1	Nominate officers	06/30/2019	Completed
2	Establish SEMS	06/30/2019	Completed
6	Staff Training	09/01/2019	Completed

Contacts

For Inquiries About the Project, Contact

PC Capital
Pablo J Cervantes
Managing Partner
+52 55 52 51 82 79
pcervantes@pc-capital.com
Reforma 2654 piso 8, Chapultepec Morales, 11570, Mexico
Websitehttps://www.pc-capital.com/capital-privado-mexico/

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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