48409 - GEF SAGF III

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Summary of Investment Information

Project Number

48409

Company Name

SOUTH ASIA GROWTH FUND III, LP

Date SPI Disclosed

Jun 15, 2023

Country

India

Region

South Asia

Projected Board Date

Aug 2, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Dec 16, 2023

Department

Equity Portfolio Management

Industry

Funds

Previous Events

Approved : Aug 4, 2023
Signed : Aug 11, 2023
Invested : Dec 14, 2023

Sector

Growth Equity Fund

Project Description

IFC proposes an equity investment of up to U$40 million, not exceeding 20% of the total commitment, and an additional co-investment envelope of up to US$40 million under the delegated authority framework, in South Asia Growth Fund III, L.P. (the “Fund” or “Fund III”), a mid-market private equity (PE) fund focused on providing growth capital to companies across climate solution themes in India and opportunistically in Southeast Asia, and together with South Asia Growth Fund III, SCSp (Luxembourg Feeder Fund) is targeting US$300 million to US$400 million in total commitments. Consistent with its prior funds, Fund III will target mid-market companies in the climate solutions supply chain focused on (i) renewable energy value chain; (ii) energy efficient enhancement; (iii) food security solutions; (iv) resource / waste recovery solutions; (v) water security solutions; (vi) mobility solutions; (vii) smart cities and green building solutions; (viii) tech / digital solutions; and (ix) low carbon transition solutions. The Fund is expected to size its average ticket per company in the range of US$20-US$40 million in 9-12 companies.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	80.0

Development Impact

The Fund is expected to increase access to PE capital for climate investments and value creation for mid-market companies in India, focusing on climate adaptation, mitigation, and circular economy. There are a limited number of ‘green’ or ‘climate’ focused PE funds in the Indian market. Despite the favorable regulatory conditions and government policies for climate finance, commercial investors are still wary of investing in climate-focused funds. In this context, IFC’s continued support to help the Fund will help it build a sustained track record in climate finance and demonstrate that climate-focused investment vehicles are commercially viable and attract new entrants into the market.

IFC’s additionality is expected to be both financial and non-financial. IFC’s financial additionality will help the Fund reach its final close and enable the Fund to attract more follow-on equity for its investees. While India has a strong PE ecosystem with higher fundraising volumes compared to other emerging markets, climate-focused funds, such as Fund III, are perceived as higher risk by investors, given concerns around securing adequate deal flow and find it harder to fundraise. In this context, IFC’s continued participation alongside other existing development financial institution (DFI) investors is expected to signal confidence in the Fund Manager and provide comfort to potential commercial investors looking to come in at a later close.

E&S Category Rationale / Risks and Mitigation

GEF III aims to invest in mid-market growth companies across climate solution themes (e.g. renewable energy value chain; energy efficiency enhancement; food/water security solutions; resource /waste recovery; green buildings; low carbon transition; tech/digital/ mobility solutions etc.). Most of the environmental or social risks or impacts of these sectors will be few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures and good industry practices. The E&S risks and impacts of the project relate to primary supply chain, labour and working conditions, occupational health and safety, handling of hazardous materials, and community impacts. The Fund will not invest in any higher risk activities that may include involuntary resettlement, risk of adverse impacts on Indigenous Peoples, significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage, or significant occupational health and safety risks. The Fund will not invest in any coal-related project or any financial institution other than low-medium risk. Hence, the E&S risk of the proposed investment is medium, and the project is categorized as FI-2 according to IFC's Policy on Environmental and Social Sustainability. The applicable performance requirements will be i) the IFC- FI Exclusion List; ii) the relevant national E&S laws and regulations; and iii) the IFC Performance Standards (PS).

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
EPACK Prefab	India	D-AA- Construction and Real Estate
Sahyadri Farms	India	A-AJ- Other (Agriculture and Forestry)
Sterlite Power	India	V-DA- Electric Power Transmission
TI Clean	India	M-CD- Automotive and Light Vehicle

The Fund Manager is an existing IFC client. It has appointed an ESMS officer and is implementing a detailed E&S risk management system (ESMS) which includes policy and procedures for screening against Exclusion List, categorization, due-diligence against IFC Performance Standards, monitoring of the portfolio and use of external consultants for due-diligence. An external communications mechanism has been developed and operationalized in line with the requirements of IFC PS-1. The ESMS is aligned with applicable performance requirements and adequate for this project. IFC will review the Fund’s E&S Due Diligence for the first three investments prior to the Fund’s investment and those for financial intermediary investments to support ESMS implementation.

Contacts

For Inquiries About the Project, Contact

GEF Capital Partners LLC
Raj Pai
Managing Partner

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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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